Ou! So now you care about Greek politics? – Well you should.

Nενικήκαμεν (We have won!) After a short but intense electoral period SYRIZA won a milestone victory. According to official results, ‘SYRIZA’ won 36.34% of the votes compared to 27.81% for the outgoing government coalition leader ‘New Democracy’, 6.28% for Golden Dawn, 6.05% for ‘To Potami’ party, 5.47% for the Communist party ‘KKE’, 4.75% for the right wing ‘Independent Greeks’ and 4.68% for the centre-left ‘PASOK’ party.

parties greece


According to the Greek electoral law, in an effort to ensure a stable government, the party to win first place in the general elections receives a fixed number of seats in the Parliament. This explains why ‘SYRIZA’ managed to gather 149 seats compared to 76 for ‘New Democracy’. Nonetheless, absolute majority would have required 151 seats, forcing Mr. Tsipras, the youngest Greek Prime Minister in recent Greek history,  to go on the hunt for a coalition partner.

As agreed this morning, SYRIZA will cooperate with the Independent Greeks, an anti-austerity offshoot of New Democracy that has been extremely critical of austerity policies. It is the second time in 30 years that Greece will be led by a right-left wing coalition, only this time the radical left is the leader. As expected popular sentiment against austerity won over the usual left-right ideological differences. It also raises questions on the Ministries that will be allocated to the Independent Greeks given it has held conservative views on social policies.

New Democracy and PASOK: Farewell to the old

Even before exit polls were announced ‘New Democracy’ officials came off as defeatist on Greek television. Over the past days, outgoing Prime Minister Antonis Samaras and his allies in the party had received criticism over the increase their right-wing rhetoric, when the majority of undecided voters identified with the centre. Today, while no one openly voices doubt over Samaras’ leadership of the party, it is likely that the liberals will begin discussing on the direction the party should take to become an efficient opposition force and not lose its appeal to its voters in order to avoid what happened to ‘PASOK’ (socialist party).

Also of note, for the first time in 93 years, there will not be a Papandreou in the Greek Parliament. Talking about one of Greece’s largest political dynasties, this is a big deal! Contrary to analysts’ expectations, Papandreou’s party, ‘KI.DI.SO’, did not manage to go beyond the 3 per cent threshold that is required to elect representatives. Going forward, the centre-left will have to change both its leadership to a younger more inspiring one and its agenda in order to re-claim the space owned by Tsipras in latest elections.

Golden Dawn: The far right becomes mainstream

With the decline of the centre-left also came the rise of the far-right. Golden Dawn scored 3rd and maintained a similar share of votes with the one won in the European elections. It is worrying to notice that despite voters having outlets to express their right-wing anti-austerity sentiment, such as the ‘Independent Greeks’, Golden Dawn’s scores show that being from the far-right and xenophobic has become relatively mainstream in Greece today. The challenge for SYRIZA? Address key issues, such as immigration in a productive way in order to prevent further shift to the extremes.

What’s coming up from now on?

Once sworn Prime Minister, Tsipras will have to put his priorities in order. While SYRIZA officials negotiate their position in the new government – it is rumoured that MEP Papadimoulis will lead the Ministry of Interior – Tsipras is to nominate a successor for Mr. Papoulias, the outgoing President, before the next Parliament Plenary on 5 February 2015. After all, this is the reason why elections were called in the first place. Latest rumours suggest that he will nominate a centre-right President in order to ensure the opposition’s support. Names discussed include Commissioner Avramopoulos and former Prime Minister Karamanlis.

tsipras dr house

All eyes on Brussels

Even though things happen to run smoothly in Athens all eyes have shifted to Brussels and Berlin. The elections’ results will likely dominate the discussions at today’s Eurogroup.

In Berlin, Angela Merkel indicated what everyone expected: Germany will cooperate with the new government only if agreements are honoured and the debt is repaid – a position which does not seem to fully acknowledge the meaning of yesterday’s vote. The Kanzlerin has no other choice. She is trying to balance a potential anti-Euro sentiment from her voters while acknowledging impact of the Greek vote other countries such as Spain or Portugal. Ms. Merkel will hope to find support across Europe to further prevent the ruins of her austerity politics crumbling down on her.

Looking West, Paris might be a first pillar of support .In Paris, François Hollande is also in a delicate position, seeking to strike a balance between, on the one hand, upholding France’s European commitments and preserving the Franco-German duo, and on the one hand, fighting the rise of the extreme-right fuelled by social disgruntlement and calming the rising voices within the left fringe of his own party.

Tsipras’ actions will have an impact on other Southern European countries as well. If he abides to the Troika’s requirements the shift in the European austerity paradigm will have merely been wishful thinking. Either decisions will also strongly impact the performance of parties such as Podemos in Spain, in light of the December 2015 general elections.

This leaves us to wonder whether Tsipras will come back on his word to re-negotiate Greece’s debt, thus creating a crisis within both his party and his coalition partner or will decline the Troika’s offer and lead Greece out of the Eurozone. This becomes even more pressing considering Greece may face a liquidity problem as soon as early February.

As we have predicted Tsipra’s decision to make a U-turn will be the beginning of both a crisis in his party and of political instability in Greece. We’ve only gone from the fights of the Iliad to the unchartered waters of the Odyssey and there’s quite some manoeuvring to do, before we’re safely ashore.

By Ilektra Tsakalidou, Claire Bravard, Joachim Wilcke, Lucie Martin & Martin Bresson

Leave a Comment January 26, 2015

#ekloges2015: THE ANATOMY OF A VOTE

Over the past couple of years the spotlight has been shining over Alexis Tsipras, the leader of the Greek opposition radical left party ‘SYRIZA’. Media and political analysts across Europe have either been raving about his political charisma, presenting him as Europe’s new champion against austerity, or painting him as the Eurozone’s biggest threat.


SYRIZA’s rise – meteoric yes, unexpected no

But how can one explain the rise of the radical left in Greece when just a few years ago, ‘SYRIZA’ only received 6 per cent of the votes?

One doesn’t need to look very far – the crisis and its enormous impact on the Greek population is the very simple and obvious reason. With an unemployment rate around 30 per cent (50 per cent for young people) and wages across private and public sectors plummeting, the most effective political rhetoric is one damning the austerity paradigm.

In his programme for economic recovery, the “Thessaloniki plan”, named after Greece’s second largest city and a former industrial centre, Alexis Tsipras’ promises include raising the minimum wage and halting the laying off of public servants. This of course sounded like music to the ears of the millions of Greeks who had been enjoying the security of working for Europe’s most overinflated public administration. To be specific, in Greece, if one wants to rise to the top of the political pyramid, one needs the support of the public administration. Otherwise, not only is election less likely in the first place, in the event one manages to do so, it will be almost impossible to gather sufficient support from the administration to deliver quality work. The latter is exactly what happened in 2004 after the election of the centre-right ‘New Democracy’ party. The administration was unofficially affiliated with the centre-left ‘PASOK’ party, who had been in power for over 10 years. A significant number of administrators refused to work with newly elected ‘New Democracy’ Ministers, hiding documents and refusing to share information. In addition to increasing levels of dysfunction within the public sector, the refusal of part of the existing staff to work with the new government had led to an explosion in the size of the administration. Nepotism aside, to combat the old guard’s refusal to work with the new guard, ‘New Democracy’ Ministers simply just hired more staff, making the existing bubble even bigger.

Another reason for Tsipras’ rise has been the political vacuum in Greece’s centre-left. At the moment, 3 political parties, ‘To Potami’ (The River), ‘To Kinima’ (The Movement) and ‘PASOK’ (Socialist Party) have been bickering over who better represents “socialist” ideas. The lack of a unified social-democratic party with a programme differentiating itself from ‘New Democracy’s’ “pro-Europe, pro-austerity” stance or SYRIZA’s “anti-austerity” posture encourages many voters’ to flirt with ‘SYRIZA’. That has been especially the case for older generations who worshiped former PASOK Prime Minister Andreas Papandreou, and who Alexis Tsipras’ has modelled his communications style on.

Alexis Tsipras has been careful to model himself on Papandreou, and in doing so has developed a campaigning style that is informal, ‘close to the people’ and one that strongly appeals to Greece’s 1980’s ‘PASOK’ generation


In any case, “στους δυο τρίτος δεν χωρεί” (in two there cannot be a third), proclaims a Greek saying. Historically, from the eternal North/South Thessaloniki-Athens divide, the Civil War in the late 1940’s, to the military junta in the late 1960’s, and even to football, Greeks have always been polarised. In this election, Greek politicians are capitalising on that polarisation, and campaigning on the very explosive question “Are you pro or against Europe (interchangeable with austerity)?”

The ‘day after’ – The impact of a Tsipras U-turn

Regarding the current “pro or against Europe” dilemma, the ‘day after’ the elections will be critical. In the event ‘New Democracy’ wins (it seems unlikely at the moment according to polls), Tsipras will remain in opposition and continue to play on his “charisma” in order to further develop his image of Europe’s messiah. However, if he is called to form a government on the 26th January 2015, things may prove a bit trickier.

First, it is not yet clear whether or not he will make a U-turn and put forward a more moderate stance on the renegotiation of Greece’s debt and austerity package, as he has indicated in his latest interviews. Depending on which parties he decides to form a coalition with, his room for maneuver may be limited. There is no way he can introduce structural reforms and maintain a productive relationship with the Troika of the International Monetary Fund, the European Central Bank, and the European Commission, if his government coalition partners include the ‘KKE’- Greece’s communist party. On the other hand, if he decides to align with the right-wing, anti-austerity ‘ Independent Greeks’ party, he will receive intense criticism from within his own party, as the two parties do not align on a number of core social issues, such as the division of the State and the Church.

Second, in the event Tsipras manages to form a government with more moderate partners such as the ‘Democratic Left’ or ‘The River’, it’s crucial to keep in mind that Tsipras is not ‘SYRIZA’’s “absolute monarch.” ‘SYRIZA’ is in fact a coalition of small left wing parties, some of which have significantly more radical opinions than Tsipras on issues of national interest such as the debt negotiations. This means that, even in power, Tsipras is at risk of being derailed by his own party.

In any event, the day after will therefore by no means signify the end of Greece’s political instability. In his effort to appeal to Greek voters and the Troika, Tsipras may jeopardise his appeal to his own party. Given the existing fragile balance of power, forming a stable government seems more like wishful thinking over a possible reality. There is a very high chance that following the January elections, Tsipras will fail to please all his partners, and a second round of elections will become inevitable. Two elections in two months – that’s a guaranteed way to put stress on financial markets and for Greece to lose its international partners’ “unconditional’ trust. This would result in decreased bargaining power for Greece during the negotiations on the financial assistance package (for more on the elections’ impact Greek-EU relations take a look at Claire Bravard’s post from yesterday on GREXIT- BRACING EUROPE FOR A SECOND ROUND).

So no matter what happens on Sunday, this is not the end of the tunnel. In trying to please everybody, Tsipras’ likely U-turn may cost him power, and see a return to the polls within weeks. As we all know; the road to hell is paved with multiple elections.

By Ilektra Tsakalidou

With the help of: Claire Bravard, Alexandria Hicks, Joachim Wilcke, Lucie Martin & Martin Bresson

Leave a Comment January 21, 2015


Don’t blink; Greece again is on the brink. 

Once again, it seems like it’s never the right time to take some days off in Brussels. As Europeans were still unpacking gifts and drinking and eating unreasonable amounts, Greece put a halt to holiday cheers by announcing it was going to hold general elections on the 25th of January- a year and a half ahead of schedule.

As far as explanations go for this sudden and politically charged decision, the reality is that Antonis Samaras played a high hand, and lost.

Under the Greek constitution, elections for President are held every 5 years (against 4 for the Parliament). Nominated by the government in place, the Presidential candidate must go through 3 rounds of voting in the Greek Parliament (Vouli) to secure a minimum of 180 votes in the final round of voting. The term byzantine doesn’t come from nowhere, and Greek politics is played hard- politicians use of the three rounds to leverage their influence and secure outcomes for themselves, their parties and their constituencies. If support of 180 parliamentarians is not secured at the end of the third round, a general election is automatically triggered.

On the 29th December, it became clear that the current government, a coalition of the Centre-right (New Democracy party) and the Centre- left (PASOK), led by Antonis Samaras, had fallen short by 12 votes.

Whilst observers may have been expecting elections, surprisingly, none of the two big political parties, including the opposition party SYRIZA and its leader Alexis Tsipras, who have been leading in the polls, were completely ready for a political campaign and were vocally expressing their desire for elections later in the year.

The sudden call for elections has caught them all on the hop, and has pulled the veil back on a volatile situation that has been bubbling under the surface for months.euro

Inefficient reforms in a dissatisfied Greece

This economic and political turbulence is seemingly exactly what is working for Alexis Tsipras, the leader of the radical left party Syriza, now leading the polls on average 3 points ahead of New Democracy as we approach the election date. Mr. Tsipras is surfing on a wave of exasperated voters, pinned down by harsh reforms that failed to bring back growth 5 years in a row. Indeed not only has GDP in Greece fallen back to its year 2000 level, but this time it’s accompanied by an exorbitant amount of debt reaching 174% of its GDP (109% back then). Moreover, the reforms engaged have cut expenditures (reduction of the number of civil servants, salary freezes, etc.) but have not tackled the deeper problems of the Greek society: tax evasion, corruption, absence of modern land registers… and have thus failed to complete the modernization of the country.

Nonetheless, the potential arrival of a radical left party at the head of a severely indebted state has stirred reminiscent fears of a Greek exit – or “Grexit” – in 2012. As expected, renewed fears have had an immediate impact on financial markets. The Athens Stock Exchange has lost over 20% of its value in less than a month (link). In turn, all eyes turned to Berlin and Frankfurt. The Spiegel reported that Germany would not necessarily be opposed to a Grexit, as the Eurozone is now much more resilient than it was in the period from 2010 to 2012. Indications of these fears are soaring spreads on Greek bonds to levels recalling those of 2010. In parallel, these qualms are triggering a drop of the value of the euro which reached its lowest levels against the dollar since November 2005, and is likely to continue to fall (this drop is also supported by expectations of quantitative easing measures from the ECB).

Apples and apples or apples and pears?

In spite of some striking similarities, the situation is not the same as during the 2010 to 2012 period when the future of Greece in the Eurozone was at stake. And Alexis Tsipras understands this. Indeed, in his program it is no longer a question of leaving the euro for the drachma or refusing to pay back the country’s debt, but rather he has adopted a more reasonable discourse asking for a renegotiation of the Greek debt and a halt to the austerity policies which have failed to bring back growth or diminish the debt burden. He aims to appeal to the more moderate Greek voters but also to the sympathy of other European countries currently facing similar debt burden difficulties, namely the 2nd and 3rd economies of the Euro Area, France and Italy.

Another major change compared to 2012 has been the watering down of SYRIZA’s initial program. Indeed the Eurozone is better equipped than it used to be. It has established a number of firewalls such as the European Stability Mechanism, the Banking Union and especially a Central Bank which has shown it will act and buy government bonds when necessary. In other words, the risk of contagion to other Eurozone countries is contained and markets respond to it: spreads of Spain and Italy have barely moved.

Surprisingly though, this is not necessarily good news, especially not for Mr. Tsipras. The increased strength of the Euro Area (at least in appearance) provides Germany with a stronger deck of cards in the upcoming gamble for Europe’s future. The major argument which finally convinced Ms. Merkel (almost too late) to participate in the bail out of Greece was that the Euro Area would implode if Germany did not act. However, if this argument is less valid today, voices against “the lazy Mediterraneans” have not faded away. The German Chancellor is facing very strong pressures from her own political base against erasing (even partially) the Greek debt, which in Germany is perceived as German taxpayers having to pay for the Greeks’ “laziness”. Therefore, it is possible that Ms. Merkel will indulge slightly to the right following the CSU, in order to oust the AfD (Alternative für Deutschland).

Moreover, the German government also understood that it was being closely watched. Indeed, firewalls may calm financial markets but it is feared that demonstrations of leniency might encourage other countries to cut austerity policies short. Firewalls erected to stop the deadly “feedback loop” between sovereigns and banks are not high enough to stop other Member States to start questioning current economic policies.

Yes We Can – Podemos or not?

The Greek elections are not only a Greek issue, nor even a German-Greek problem, but the outcome will resonate within other European national political/election debates. On one side, voters in crisis-ridden countries such as Spain and Portugal will be watching if new negotiations between the Troika and Greece are to result in either debt forgiveness or renegotiation of the bailout terms – due to end in February – or both. A favourable outcome for Greece (staying in the Euro Area with a haircut on its public debt) could rattle up support for Spain’s new left-wing party Podemos calling for fairer and more growth orientated politics. On the other side, Fins, Brits, Poles, Danes and Estonians (also facing elections this year) might under such circumstances turn to populist anti-European parties, which will promise them that no more hard earned tax money will be spent on “lazy Southerners”.

Either way the Greek elections on 25 January will rattle the cages of Europe’s capitals and Brussels as Mr. Juncker will be seeing the rules of the game on his investment plan change and the perception towards stimulus-based growth policies evolving. Although 2015 has just begun, with such an outlook ahead, we might already wish it to be 2016.


We’ll be closely following the Greek elections this week, and into next week. Tomorrow, Ilektra Tsakalidou will be writing on Alexis Tsipras options in the event of a win on Sunday. We will also be tweeting throughout the week and from the polls on Sunday: @fleishmanhillardEU.

By Claire Bravard

With the help of: Ilektra Tsakalidou, Alexandria Hicks, Joachim Wilcke, Lucie Martin & Martin Bresson

Leave a Comment January 20, 2015

Energising Europe’s future

Juncker’s strategy could kick start some badly needed investment in Europe’s energy infrastructure

On Wednesday Commission President Juncker announced his long-awaited investment strategy, a plan which aims to give Europe’s economy a much needed shot in the arm as the bloc continues to stagnate. Formally called the European Fund for Strategic Investments (EFSI), the mechanisms of the fund are based on leveraging an initial €21bn into an eventual €315bn of investments in both long term infrastructure and short term access to capital for SMEs and mid-cap firms.

The strategy itself is based on three main principles (the “three sides of the triangle”, as Vice-president Katainen put it at the Strategy’s launch).

  1. New finance will be mobilised
  2. Finance will be steered towards EU approved projects
  3. Regulatory barriers will be removed via the entrenchment of the single market.

With enough leverage…

The basic principal behind the fund is quite simple (though no doubt the economics will be discussed ad nauseum in the coming months).The fund is intended to act as a first line of investment, shouldering risks which traditional banks might shy away from, and in doing so, it hopes to encourage private investors to fall in line behind it. “At the heart of this package there is a political choice” Vice President Katainen explained during his speech. The EU must choose between a traditional grants and loans system, limited by the capital at hand, or it can facilitate “riskier borrowing and create a larger lending capacity”.Investment Fund Chart

Diagram 1: How the strategy should work

Energising Europe’s future

The second part of this “triangle” is the identification of infrastructure projects for funding. The EU is currently reviewing around 1,000 projects for viability and utility, and those that receive the “European stamp” can expect to have the weight of this fund behind them, reducing the risk and incentivising investors

It comes as no surprise, given the current cloud hanging over Europe’s somewhat precarious energy situation, that a good chunk of this fund will be earmarked for investment in energy infrastructure. Vice-president Šefčovič may not have been presenting the plan, but he certainly will have a hand in running it, with the oft-repeated goals of “completing the internal energy market” and “diversifying supply” firmly on his mind.

The abovementioned projects will no doubt have drawn heavily on the ‘Projects of Common Interest’ (PCIs) agreed last year, boosting financing and speeding up infrastructure development.  However, Katainen shied away from making any firm commitments, saying “there will be no sector-specific or country specific quotas”. This leaves an air of uncertainty over how much of the fund will be spent on energy, though there is no doubt in its priority

Tearing down the barricades

The third side to the triangle, the completion of single markets in the energy, digital, services and transport sectors, was spoken about at length by Katainen. It comes as no surprise that energy infrastructure was a top priority, given its necessity in the completion of the energy union. “There are many people who want to invest in the energy sector” he noted “but until we have an Energy Union they cannot do so as easily as say in the food sector”.

Picking Winners

The trouble with an investment fund, it appears, is that it will have to choose what to invest in. This immediately leaves the Commission open to the often heard criticism that it is interfering in the market and inevitably “picking winners”. Immediately after the strategy was proposed numerous industry associations published position pieces that were at the same time optimistic and concerned. Aside from those that were sceptical (to put it lightly) of the level of private investment the fund would create, renewables industries were quick to claim this as a large step forward for their sector, while the more ingrained electricity providers were more cautious, encouraging investment in the “framework”, while leaving technology choices up to the market

What happens now

Juncker has bet on the fund sailing through the other institutions. Certainly, Parliament President Schulz appeared to welcome it with open arms, calling it a “turning point” following years of financial and currency woe and austerity. However, we will have to wait until the next European Council meeting (between 18-19 of December) to see how much the Member States agree. All going according to Juncker’s plan, the fund should be up and running by spring 2015.


Cillian Totterdell and Cillian O’Donoghue




Leave a Comment November 27, 2014

Size Does Matter

In between the chaotic mid-week politics, and changing of the guard in the Commission, over the eerie quiet of a weekend in a Brussels emptied of its lawmakers, regulators and lobbyists, an equally quiet revolution took place. On 1st November, in accordance with the Lisbon Treaty, new Council voting rules were introduced to keep the ever-expanding complexity of Council of the EU meetings under control. Amidst all the institutional changes that this year has seen, this one could well be the game-changer in disguise.

Under the new rules, larger member states – namely, Germany, the UK, France and Italy – gain significantly more voting power, whilst medium-sized and smaller states lose out as voting in the Council will now be determined by population size. This means the voting weight of Germany – the largest member state – will nearly double, and the UK, almost the same, whilst medium-sized and smaller members like the Czech Republic and Belgium, nearly halve and Malta and Luxembourg see their voting weight nearly vanish.

at a glance

The new rules aim to bring to a close the, at times, seemingly never ending quarrels in Council, where Member States hitherto could team up fairly easily and form a blocking minority. In its essence, these rules will mean that proposals will need 65% of the EU population’s support to pass, while 55% of Member States must be on board. So is this a conspiracy by the big member states, you ask? Ahh! No! Not really. As you will remember (or not), the political momentum way back in 2007 – before the financial crisis turned politics into dedicated “national treasuries first” strategies – was all about making Europe more democratic and transparent and this was to be reflected in the one man/woman – one vote system entering into force last weekend.

As always in European politics a few reasonable safeguards has been set,  the additional requirement to have the blessing of 55% of member states is part of the eternal great trade-off between big and small in the EU.

Equally, to ease the transition from the old to the new, the safety net of the old voting rules may still be employed by any Member state until 2017.  Although calling on the old rules is not going to be a free ride for the Member State(s) who does it. Au contraire; it is expected to be a highly political issue and countries that employ it will have to muster up a lot of political capital.

The new voting rules make blocking minorities harder to form. Our analysis (read full report here) shows that the ‘euro-out’ countries and Eastern European countries will no longer be able to achieve a blocking minority. However, the large Mediterranean countries can still form a blocking minority – something which could prove crucial in austerity themed debates.

So; are we going to see massive changes in how Council makes decisions from now on? Ehhh…again; No! We’re not going to see it. Our analysis of votes held in the Council over the last year show that 65% of the votes were agreed upon unanimously, and many more only saw a single member state abstain or object. And the Ministers in Council are likely to proceed in the same manner of seeking consensus and making efforts not to make a display of disagreements.

However, we are going to feel the change. It will occur in the negotiations in the working Groups before a proposal is put in front of the ministers and thus in the day-to-day compromises as voting rules are generally more an instrument in the hands of the negotiators to identify (and solve) key issues and to push negotiations forward.

Still; while in all likelihood the Council of the EU will remain a consensus building machine, these new voting rules significantly shifts the balance of power into the direction of the big 4. Whether this is a step in the right direction in terms of taking on the great challenge to close the democratic deficit in the EU, or whether it will more likely leave the governments, negotiators and especially populations of the smaller Member States even more disenfranchised from the European project, is still to be seen. Clearly the aim of those ratifying the Lisbon Treaty was the former… But so much has changed since then.


Martin Bresson, Marijn Swinters and Anne Murray and the FH Institutional Research Unit



Leave a Comment November 13, 2014

Five things I learned in Strasbourg last week

There was a certain irony in being asked by the British Chamber to open their New Generation visit to France’s Death Star inspired version of the European Parliament building by talking about why going down to Strasbourg is important. The irony being that most of us seek to avoid going there if we can help it and I am no exception. I even started a short lived Facebook group called “I’ve been to Strasbourg once too often” after a particular heavy Parliamentary year about a decade ago. However, it must be said that as long as remains a relatively infrequent occurrence rather than a monthly trek (poor souls you MEPs/EP staff), it’s a lot of fun. I came back tired, but rejuvenated.

So five things I learned while down there, some serious, some not, on the British Chamber’s Past It Generation trip (i.e. the full EU Committee visit), which I had the honor of chairing the following days.

It’s all a little bit too early for policy discussion

Unlike last year’s British Chamber trip – at the height of the rush to get stuff agreed before the elections – our panelists were eloquent, passionate but general. One even said they’d been so fixated on hearings the real work of the EP had yet to start. With a couple of notable exceptions it was clear that the real legislative work on many committees has yet to get into full swing.

Optimism abounds

Ok, so it may not last long but all those we spoke to in the main groups had a sense of optimism that Juncker and his team are a fresh start. All feels possible. The incoming Commission has a window of goodwill to draw upon, which if used could see the EP be more help than hindrance.

Animal welfare by day, foie gras by night

One dinner guest sheepishly admitted they were an animal welfare advocate by day, while getting stuck into a foie gras starter followed by a veal main. It’s a bit like Strasbourg as a whole. If you want to understand what’s really going on, forget the statements for the record in plenary, you’re more likely to hear what people really care about in in the bars and restaurants late into the evening. Yes, that makes the whole experience much more tiring, but also more fun.

The Flower Bar is the place to see

Talking of bars, the Flower Bar is a magnet for MEPs who are cooped up in their offices as well as those – like me – who have no office in the building. If you want to catch up with folk, see who is talking to who or try to catch someone over coffee,  grab a table and just people watch. It’s fascinating what you can learn.

The British contribution is both walked all over and scares people off

As part of the British Chamber visit we of course could not but discuss the rather tight corner the UK seems to be backing itself into. Indeed we’ve even surveyed our members on this issue (unsurprisingly they think leaving the idea is a bad idea). The Flower Bar carpet is perhaps a suitable metaphor, as I’m told it’s designed by a Brit. Walked over by Europeans all day long, at first glance it appears frightfully unreasonable. But after you get used to it, you realize it is as much a part of the furniture as the hemicycle itself. The place would simply not be the same without it.

James Stevens

Leave a Comment October 29, 2014

Five things we learned about the new Environment Committee

Brussels doesn’t do political theatre like Westminster or Congress, so it’s unsurprising that there’s a slight fixation at present on the EP’s grilling of Commissioner-designates. One journalist may have described it as the equivalent of being mauled by a bunch of poodles, but those damn animals have drawn blood in the past and they are looking likely to do so again.

However, there’s been some real work going on at the same time in some of the Committees. So if you can get past the blood on the carpet in the Spinelli building, it’s worth lingering on the vote on 24 September in ENVI on the carbon leakage list under the EU’s Emissions Trading Scheme (ETS). For those of you who missed it, the Eickhout motion that sought to challenge the Commission’s continuation with the current carbon leakage list failed by 34 votes against to 30 votes for, with 3 abstentions.

Unfortunately, the European Parliament still refuses to publish how MEPs vote in Committee, even when the vote is done electronically. From our understanding of how different people voted, here’s five takeaways from the result:

1. Don’t assume if you’re a member of the EFDD you’re not in favor of stronger environmental rules

European political groups are broad tents to say the least. UKIP and the Five Star Movement may well be group bedfellows but they are likely to vote differently in the ENVI Committee.  The Five Star Movement is more attuned to environmental issues and so it is no surprise that they sided with the Greens.  Going forward, if the Greens, Radical Left, and S&D stay together they could still deliver a pro-environment majority with the EFDD.

2. The views of the Socialist group may be evolving

If anyone won the European Parliamentary elections it was the Italian socialists under Matteo Renzi. Now the largest delegation in the S&D, their three representatives in ENVI are said to have abstained from voting in order not to go against the S&D line. Only time will tell whether they can use their new-found muscle to get the S&D to change its historic leanings on ENVI, rather than having to opt out.

3. The EPP can find a common position and stick to it

For years the EPP has struggled to prevent members of its group in ENVI going native on Committee. The EPP created a working group structure to try and get a group line in advance of important committee votes. However in the 7th legislature , EPP members still took different lines in the ENVI and ITRE on subjects like ETS back-loading and shale gas. This time it would appear the group came together, found a line and stuck to it on an issue where divisions may have appeared in the past. The EPP group’s energy policy paper, notably inspired by ITRE members, is no doubt intended to provide more cohesion among the different committees in the future.

4. Don’t expect a divided ‘industry’ to be so ‘influential’ on other ETS related files

There were suggestions that industry had been influential on the file in Committee, which sounded suspiciously like sour grapes on the losing side of an argument and an indictment of the intellectual powers of our elected members. It is however true that industry may have been united on this one. After all the only people advocating on the industry side were probably those on the list. Don’t expect such a united front when it comes to real ETS reform. There shall be industries on both sides of any debate; some who want higher carbon prices and some who want lower ones.

5. Time for all sides of this debate to start talking about solutions

The result should be a wake-up call to all sides on the ETS debate. The current political environment, with a focus on jobs, growth and competitiveness, is unlikely to be conducive to the kind of ETS reform that those who favor high carbon prices desire. At the same time, the protection afforded to energy intensives is still likely to whittle away over time. The direction on things like the carbon leakage list is clear, Member States don’t have money and a European compensation scheme doesn’t look like it’s on the horizon any time soon. The result could be all sides of this debate losing. Less and less protection for energy intensives combined with no real reform of the EU’s main instrument to tackle emissions.

It’s time for key players  on both sides to come together and start talking about policies that deliver for the most affected energy intensives, while also getting us on that pathway to a low carbon economy. Otherwise this ETS reform is going nowhere fast and that’s good for no-one.

Aaron McLoughlin and James Stevens

Leave a Comment October 7, 2014

The Global Financial Reform Agenda – The Birthday Edition

The global reform agenda is many things… Important? Yes. Ambitious? You bet. Enormously complex? That too. But more important than all those, it is celebrating its birthday today!

And it’s a big one. Five! The world’s big push to stabilize the financial system after the global financial crisis turns five today.

Half a decade ago, on September 25th 2009, world leaders gathered in Pittsburgh for a G20 Summit not one year removed from the collapse of Lehman Brothers, with most countries still deep in recession, to agree on how they would make sure that such a crisis could never happen again.


Finance Ministry officials quickly reached for anything caffeinated, as what was agreed wasn’t necessarily for the lethargic of heart. Leaders tasked the Financial Stability Board, the newly formed global watchdog of financial market health, to launch a reform agenda aimed at tackling three goals:

·     To increase the stability of banks worldwide by making them hold more capital and liquidity to prevent another crisis.

·     To put an end to Too-Big-to-Fail banks by creating plans that would allow markets to cope with another Lehman-style collapse without needing a taxpayer bailout.

·     To standardize and regulate the global market for over- the-counter derivative contracts in order to increase its transparency and stability.

So, five year birthdays are important ones to celebrate. The important question though, would be what kind of birthday party is the financial reform agenda having? Is it all streamers, sun, cheering and cake? Or have things gone a bit awry, the clown is a bit too scary, and the kids are all standing under the porch crying while it rains outside?

The truth though, lies somewhere in the middle…or rather; holds a bit of both scenarios.

There should be no doubt. The financial reform agenda is the signal achievement of the G20, the Financial Stability Board, and the whole architecture of global financial cooperation that they brought into being five years ago. Before that, regulatory cooperation on banking and financial markets issues wasn’t organized on anything near the scale that it is today. That means that international financial rules are becoming more standardized, more comparable, and more predictable across borders than they were before, and that’s a good thing for governments that desperately want to see a revival in cross-border investment as well as for the banks and financial market participants that can underwrite exactly such an outcome.

That’s not to say that significant challenges don’t remain, however. There are many of them, and serious ones at that. The international standardization of regulatory practices hasn’t been without wrinkles, and issues such as the mutual recognition of the soundness of each-others rules continues to dog EU-US financial market relations. The effective application of new regulatory practices in emerging markets is also an area where further work will probably have to be done in order to make sure that rapidly deepening financial markets there avoid mistakes their more developed counterparts have made in the past.

Another itchy problem is that the years that have passed, however, haven’t exactly been smooth sailing for the world’s largest economies – especially in Europe. EU leaders have been watching nervously this year as economic indicators, one after the other, come up flat, showing that the continent is growing slowly, if it is even growing at all.



That’s led many to consider whether the financial reform agenda has had a sufficient growth-orientation to balance out its primary mandate of seeking to ensure market stability. Are new regulations impeding banks from being able to lend to the real economy? Should we be doing more to enable securitization (the bundling of loans to reduce individual risk) to help finance a recovery? Are there specific investment areas, like infrastructure and green energy that could benefit from more tailored regulatory treatment?

These are questions that the G20, the Financial Stability Board, and others leading the global reform agenda are increasingly turning to now, and it’s an agenda driven by national leaders that are getting their feet held to the flames by angry electorates with too much debt and too few jobs.

But even at a feet-grilling barbecue it would take a pretty tough critic to not admit that the global regulatory effort has had some fairly remarkable success in making financial markets much more stable than they were five years ago. The new goal of propping up global growth will take a renewed agenda, and another big push to develop and implement. That’s going to take more time.

All in all then, the financial reform agenda’s fifth birthday is worth some applause, at least a small piece of cake and nod of recognition. Stay with this toddler though! The next five years are likely going to be just as crucial as the last.

Screen-shot-2010-07-18-at-23 38 42-590x292


Scott Martin and Martin Bresson

Leave a Comment September 25, 2014

The new College of Commissioners – A recipe for success?

COMMISSIONThe long-awaited announcement has finally arrived! We watched, not quite with popcorn, but at least with baited breath, as Commission President Juncker announced his new College of Commissioners and DG allocations for the next five years. Amid festive acclamations, some raised eyebrows, temper tantrums and maybe even a solitary tear, 5 former PMs, 11 financially-savvy candidates, 8 foreign affairs specialists and 7 incumbent ministers were chosen to join the Dream Team. In true Juncker style, he surprised and perhaps confused us all.

Selecting the perfect ingredients for a politically calibrated, yet functional College of Commissioners has been a careful balancing act, leading to more than a few controversial appointments. But Europeans, fear not! Guardians of the peace and right hand men to President Juncker are the newly appointed Vice Presidents, endowed with the duty of coordinating the works. The role of these watchdog VPs is yet to be defined, as a number of policy areas fall under multiple presidencies and seem to be affected by an ‘overcrowding phenomenon’ . Will too many cooks spoil the broth?

The ‘chef’ seems confident as he blends and stirs his employment-flavoured, growth-spiced ‘bouillon’. So it appears that only time will tell whether the internal decision making systems are robust enough to prevent a multi-directional sprawl of policy proposals. Will our chef – already called a ‘Spitzenkandidat’ by some – be able to satisfy the diverse group of political ‘gourmandes’ that is the Parliament.

And how will the restaurant owners react to this new, seemingly complex methodological approach, will the chef have more liberties in the kitchen or less? Analogies are all well and good, but the issues are real, and the question of whether the power of the Commission to will return to the golden age of the Delors years is lingering on everyone’s mind. Might the Council force its hand, should overly complex decision making procedures lead the delicate institutional machine to stall?

Some might say that the balance of power will shift according to themes and personalities; however the problems that lie ahead are all fairly controversial and newly instituted officials will be keen to prove their worth under the daunting stare of the European public. The Russian ban on food imports and the ambitious objectives of an Energy Union and Common Asylum System contrived by Juncker himself, are challenging hurdles on the horizon.

So what is the recipe for success? A masterful chef, cooperative cooks, a lenient clientèle? Possibly a homogeneous amalgamation of all the above, however the first major test of whether this start-up restaurant is of Michelin star quality will depend on the willingness of talented officials to set aside patriotic claims in order to work together to achieve the ambitiously conceived and masterfully crafted plate designed by Juncker.


Alessia Mortara, Aoife O’Halloran and the FH Institutional Research Unit



Leave a Comment September 19, 2014

The Union, the sun and Espírito Santo – A fireside read on the summer past

Unlike the hurley-burley of these first days of institutional activity, August was a fairly quiet month in Europe – far set from the troubles and tensions of previous summers and the frenzied preoccupations over economic collapse. This year, Brussels emptied itself of tired civil servants, who trudged, nostalgically back to their homelands, and European capitals were filled with an unusual sense of calm – a pause between political seasons.

However, not all states were blessed with calm and warming summer breezes. A tempest was slowly brewing in Portugal where, on 4th August, the crisis hit the second largest national bank (by total reported net assets) and the ship was sunk. Banco Espírito Santo (BES), with €80.2 billion in assets and €36.7 billion in customer deposit, disappeared almost overnight.

Leaping into action, the Central Bank of Portugal resolved[1] the bank by separating BES’s sound business activities from toxic and dangerous assets thus creating a ‘bridge bank’. The “good bank” is now supported by €4.4bn from the Portuguese state, while the “bad bank” has kept the unfortunate, but appropriate, name of Espírito Santo (i.e. the Holy Spirit, but also the name of the proprietor family) and will be wound down in due course.

It seems inconceivable that only three months after Portugal’s victorious emergence from the bail-out troika (European Commission, ECB & IMF), with all that it entailed in the form of deeper scrutiny and attention, public money is still being used salvage the remnants of a banking disaster and to protect investors from ample losses. After years of Banking Union negotiations and reassurances to markets, policymakers and regular sunbathers, will all be lost?

Let’s take a look at the bigger picture – the who’s and the what’s.

With a century and half of history at its shoulders, the group to which Banco Espírito Sancto belongs, has progressively grown to become a vast empire, held in majority by the descendants of its founder. In the process, the group has expanded across borders, covering different countries and various sectors from banking to tourism and construction, thus becoming a common name in Portuguese households, the local Rockefellers.

However, this wealth of historical heritage brought little wisdom with it. When a new executive team took over BES in July, it soon discovered that the former administration had hid from regulators and the world, a €1.5bn hole in its budget, generated in the first-half of the year (50% of what BES has lost in total) – a situation far from that expected for a bank held by Portugal’s richest family.

Advice given by BES’s external auditor, to counter over exposure to conflicts of interest within the group, was ignored and proved to be fatal. Today, it seems clear that the undetected operations were repackaged by a financial intermediary partly owned by BES, in order to keep them off the balance sheets.

Record losses meant that BES’s solvency ratios fell below the regulatory minimum required to receive ECB funds, and the Bank of Portugal was confronted with an urgent choice – whether to mount a rescue plan, protecting senior[2] debt holders, or allow BES to orderly fail by applying soon to be implemented Banking Union rules.

Overnight, the Bank of Portugal decided to undertake a sort of hybrid rescue plan, mixing both bail-in and bail-out tools.

Bail-out tactics: In order to properly capitalise on the new bridge bank, the Portuguese Resolution Fund was given €4.9bn, of which €4.4bn deriving from the Portuguese State – an amount of money that tax payers will not recover if the selling price of the bank remains lower than the amount lent.

Bail-in tactics: The bridge bank system implied that all the junior bond holders and most shareholders whose assets had been isolated in the “bad bank” would endure severe losses.

If the procedure was completely legal, it was still in grey area. Had the Governor of the Bank of Portugal followed new EU rules on bail-in processes, senior debt holders and large depositors would have been part of the haircut too. As from the 1st January 2016, preserving them will no longer be possible.

Reasons for the choice of a hybrid system are varied and could be seen as a reluctance of regulators to go against the European conception of senior bond holders being implicitly backed by the state, but we’re getting ahead of ourselves and jumping to conclusions.

Let us now look at the “so what’s”.

All signs (or at least those we’ve chosen to look at for this blog) show that the whole operation was a success. And an admirable one at that! Less than a month after the bank was wound down, Portuguese 10 year bonds have reached their lowest point for debt emission in 2014 and Portugal is experiencing growth again for the first time in four years (EC figures).Bloom

Source : http://www.bloomberg.com/quote/GSPT10YR:IND/chart

Moreover, being attached to the new, “good” bank, senior bonds barely shifted, while junior bonds have plummeted, illustrating a sense of trust in the path chosen by the Bank of Portugal.


Source: http://www.ft.com/intl/cms/s/0/691f64ba-1bbb-11e4-adc7-00144feabdc0.html#axzz3CG611CPN

Data therefore suggests that financial markets have bought into the “ring-fencing” tactic, and the risks associated to BES senior bonds will not threaten other banks or the rest of the economy.

On that happy note, but in the slightly gloomier spirit of autumn, an underlying question remains – whether this well-orchestrated resolution and the resurrection of the BES banking group, would have complied with the soon-to-be rules and principles of the Banking Union.

Quite frankly, the answer is – not entirely – or at least, not as shown above. Contentious areas are capital requirements, supervision, bail-in vs bail-out systems (let alone question of whether funding in the Single Resolution Fund  was or ever will be sufficient) and, the true moratorium – whether senior bond holders understand the need to adapt their behaviour as from 2016 when the EU-wide rules on bail-in kick-in.

But we’re not going to ask the big question – whether the Banking Union has really changed anything. We’re not! Because of course… it has! So don’t be so gloomy. Go catch the last sunlight, go chase rumours about the next Commission and let summer events be summer events and… have faith!

By Martin Bresson, Claire Bravard & Alessia Mortara

[1]When a regulator decides to close down a bank that because it failed.

[2] Bond holders that will be will be paid back before junior bond holders and shareholders if the bank goes bankrupt (and if there is enough money left)

Leave a Comment September 8, 2014

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