“Brussels Bulletin”
Welcome back. We move on to item 2, which is the “Brussels Bulletin”. Dr Ian Duncan, who compiles the bulletin, will talk us through it.
Ian Duncan (Clerk and European Officer)
Members will have noticed that, in the past couple of bulletins, the section on developments in the eurozone had shrunk slightly. The information related to that topic has, in this week’s bulletin, once again increased.
There have been a number of developments, and I will draw members’ attention to a couple of them. Members will, of course, be aware of the developments in Italy. The dilemma facing the Italian political system is that the parties that secured significant support are against the broad terms of the EU’s likely engagement on debt, which will cause significant problems. The Italian Parliament meets on 15 March; we will know after that what the Government there will look like.
There are a couple of smaller—but no less important—issues to note. The bailout for Cyprus has been delayed, although there is likely to be quick movement on that. Cyprus needs a bailout of around €17 billion, which is almost the size of its gross domestic product. In addition, the Slovenian Government has fallen, and Slovenia is likely to need a bailout of around €5 billion. Those developments are a reminder that so much is going on in Europe; it seems at times that some of it is flying under the radar.
Members will recall that I said at the last meeting that there was to be a presentation in Glasgow, by the European Parliament information office in Edinburgh, on the multi-annual framework. I went along and my report is included in the bulletin. The committee was concerned about the potential reduction in structural funds for Scotland. I have reported a little bit on what David Martin MEP said to explain the position, which was that if the overall pot of money is divided between more qualifying regions, each region will get less. I have included in the bulletin the regions that are expected to qualify. This is a domestic matter—not an EU matter—that must be resolved at United Kingdom level. Work is being done on that.
There are a couple of other points to note from that conference. Members might remember that, at the last meeting, I said that the European Parliament is concerned about the state of the multi-annual framework. The view of George Lyon MEP and several other MEPs is that MEPs would likely accept the overall reduction. However, they are not content about where the money lies in the overall pot, and want greater flexibility to move it around.
On the common fisheries policy, members will recall that I have said that great progress was made in respect of achieving an overall discard ban. However, things are never quite what they seem in the EU; the discard ban is not total. There are allowances for certain countries—primarily in the Iberian peninsula—that are unable to meet the criteria. That is a concern.
The bulletin includes an overview of the horsemeat crisis, to show how the EU functions when dealing with such matters. There is a call for proposals for the LIFE+ 2013 fund, which puts money into environmental projects. Members should note that the UK does not normally use its full allocation. It is necessary to bid for the money and success is dependent on the quality of the bid. It is a reminder that there is money out there that we are not always able to draw down. The programme has one more year left to run before the next financial cycle starts.
I am happy to take questions on anything else in the bulletin.
We should ensure that our colleagues in the Rural Affairs, Climate Change and Environment Committee know about the LIFE+ programme, because there are opportunities there.
On the eurozone situation, let us hope that people do not say,
“Beware the ides of March”
on 15 March, given how significant that day is in Italian history.
I congratulate Ian and his team on the full and informative bulletin. Obviously, the horsemeat crisis is an on-going concern for people. I think that a food labelling directive is under development. Perhaps Ian will confirm whether that is the case, how it will impact on the horsemeat crisis and what difference would have been made, had such a directive already been in operation.
What comes out of the crisis is that the law has been broken—it is important to note that fraud has been committed. The greater concern is that detection of the problem happened almost by accident, and the scale of it became apparent only when people began to explore the matter. Regulations are in place that are meant to prevent such things from happening. The laws exist, but the dilemma is about how they are enforced. That is the problem.
The food labelling directive will be important because it is about ensuring that people know what is in the packet and where it has come from. However, the issue here related to the step before labelling, where there needs to be monitoring within the various production houses. Clearly, enforcement varies across the EU. Although there are clear standards for the whole EU, they are not being enforced adequately; indeed, crimes are being committed, which is even more troubling. On the fact that the crime has been identified, the bulletin has a little on how that will likely go forward, with Europol being involved.
Some people in the European Parliament take the view that more regulation is needed, whereas others take the view that the regulation that is already in place needs better enforcement. There may well be truth in both those views, but the issue is certainly an example of enforcement not working to the advantage of the consumer.
A particularly welcome development is the bulletin’s including observations from MEPs, which are good to have. On an issue that the convener mentioned earlier, I notice that David Martin MEP underlined the point that the budget agreement’s impact on structural funds
“had unintended consequences for Scottish funding, to the tune of around €300m”.
Obviously, as the note points out, that is really a matter for the member state, but I hope that the Scottish Government—I believe that Nicola Sturgeon is doing this—will make the strongest possible representations on that. As committee members, we should perhaps write individually to our own political contacts to highlight just how serious the issue is. We cannot just lose €300 million from our budgets without its having an effect; it matters enormously.
I also agree with David Martin 100 per cent in being
“offended by the retention of tobacco growing subsidies”.
I, too, am hugely offended by that. I think that it is time that the whole of Europe got together to address that, but I know that there are interests within Europe that will stop that being developed.
Finally, on the issue that David Martin raised about the European Parliament having two homes in Brussels and Strasbourg, it seems to me to be a nonsense that people have not tackled that issue in times of such austerity.
Interestingly, following a speech that he delivered in the European Parliament, President Hollande of France was asked whether, in an age of austerity, its having two homes is a cost that the Parliament could do without. He said that it could not because they are a symbol of reconciliation across Europe. It was pointed out that that is a very expensive symbol, which is measured in hundreds of millions of euros a year.
I echo Helen Eadie’s comments about the bulletin, which is once again a very useful and informative document. I also record my welcome for the development of an EU scientific advisory group, which follows the appointment of Professor Anne Glover in January 2012. That is a really important move forward in ensuring that science-based and evidence-based policy making is at the forefront in the EU.
Yes—the move has been welcomed across the EU.
Has there been any controversy about the appointment to that group of a scientist—albeit a very distinguished scientist—from Israel, which is outside the EU? Has that caused any ripples?
The group includes a scientist from Israel and a scientist from Switzerland, both of which are outside the EU. However, the answer to the question is no. I have not picked up anything about that, nor can I explain to you why the group has been extended beyond the EU, although that may well be on the basis of the credentials of the scientists. I have not heard of any concerns being expressed.
The scientist from Israel is a Nobel prize winner, so I suppose that that might count in her favour.
Secondly, one small issue is the upcoming accession of Croatia, which is obviously a near neighbour of Slovenia. Are there any concerns about impacts on the Croatian economy as a result of what is going on in Slovenia? I appreciate that according to the bulletin it is primarily a banking issue.
11:15
I suspect that the risk of contagion is strong, not just to Croatia but to the whole Balkan region, and there are concerns about that. The Slovenian situation has been bubbling under for some time, and only broke through when the Government was, in effect, dismissed by the Parliament. I understand that it was a corruption issue to do with the Prime Minister that led to the fall of the Government, although they had been keeping a lid on the situation. There is now a risk of contagion throughout the Balkans, but great efforts are being made by the European Central Bank to ensure that provisions are in place to guard against that.
I want to broaden the discussion a bit to talk about the debt management measures in the EU and how they impact on the accession states. What I see in Ian’s report is that Governments are falling with a bit of rapidity on some of these issues, particularly on austerity measures. Some populations are, to put it mildly, objecting strongly. We have seen that in Greece, and to a lesser extent we are seeing it in Ireland. I saw it at the weekend at the British-Irish Parliamentary Assembly. The Taoiseach was not quite manhandled, but there was a huge demonstration outside the conference that I attended on austerity, and Enda Kenny dealt with it really well. He said that the problem is not going away and that they are dealing with it.
Do you get any sense that the EU needs to review its demands on debt management? I do not mean to suggest that we should forget all about it, because the problems are there. However, it seems that Governments are coming under extreme pressure because of the debt management and austerity measures that they have to bring in. Is the situation being reviewed to make it more manageable for economies such as that of Ireland, and perhaps those of Slovenia, Cyprus and other countries?
The flip side of that question is this: why are accession states clamouring to join the EU if they face the EU’s possibly asking them to introduce further austerity measures to be a part of the club? It does not make a lot of sense that they would be desperate to join, but they are.
You have put together a series of questions that could be answered by a team of academics. I will give a bit of an overview. The first thing to state is that no Government that has gone to the polls during this crisis has survived; all have fallen. That is the first thing to note. Some have been replaced by technocratic Governments, not even democratically mandated Governments, which is a concern.
The second point to make is about the protests that are taking place. The ones that we hear about are only the tip of a vast iceberg. The protests are east to west, north to south and are significant. Willie Coffey asked whether there is any suggestion that the demands will be reviewed. There is not, and the reason why is that everyone is waiting for the German election. Chancellor Merkel has declared “This is the plan—this is what will happen,” and the ability to adjust that in advance of that election is very limited.
There is clearly grave concern in a number of member states. Take, for example, the level of youth unemployment in the Mediterranean countries. One imagines that that would be unsustainable were it to tip beyond 50 per cent. Everyone is crying out for a form of change because we are seeing that the current system is not working for people. It might be working in terms of the stability of banking, debt management or repayment of debt, but there is only so long that people will tolerate that.
I suspect that the German elections at the back end of the year will be the tipping point, after which there will have to be serious change. The question will be whether Angela Merkel bucks the trend and her Government survives the election. She is in the contra position of needing to appear strong, because they have got more to lose by the reform, as they would get less money back to their bankers and so forth. They have more to lose by relaxing the measures than do others who have more to lose by seeming to tighten measures. The challenge will be what happens in the next six months.
On the would-be member states that want to join, that is a reminder that the EU is still a powerful organisation; it is still a powerful union for trade, movement of ideas, funding and so forth.
The greater question is why some countries are still keen to join the euro, which seems to be so unstable that the suggestion that they can join and create greater stability is debatable. The “Brussels Bulletin” notes Latvia’s intention of joining the euro on 1 January 2014, and Poland has set a date for its plans, although that date is further away. It is interesting that those countries still believe that being part of a bigger block, with its problems and instabilities, is better than being a smaller country with an isolated currency.
Are the accession states bringing their own banking crises to the EU, or are they in a fairly healthy state? There has been a lot of talk about the convergence criteria being met, but it has been doing the rounds for years and the UK has never met any of them while remaining in the EU. Do the other smaller countries that want to join match up to the convergence criteria? Are their banking and financial institutions stable? I do not get it. If they are not, why are they getting in?
That is a good question. My advice would be that it is probably not a good time to buy shares in banks. A lot of those smaller countries were less affected by the direct crisis itself because their economies were not able to benefit. A lot of countries within the family, if you like, were able to benefit from the interest rates within the eurozone, which meant that they were pegged to the German success. The interest rates allowed for bubbles to be created. Those on the outside were less directly affected by the crisis, except countries that have big banking sectors, such as Iceland, which was already doing great things, albeit on an unstable foundation.
The smaller nations that are coming in are not bringing with them a banking crisis, but they will be affected by the broader issues. There is no doubt that there is much instability that is yet to be calmed.
Bulgaria is one of the smaller nations that have already joined the EU. It has never required to borrow from the International Monetary Fund so it has not brought instability with it because it has a fairly stable economy, although it was affected and impacted by what was happening in the rest of the EU. It is required to join the euro by 2014, as is Romania. My understanding is that that is progressing, in the same way that Latvia had to sign up under the requirements of the treaty to join.
We in the UK do not have our troubles to seek because the austerity measures do not seem to be working either for the people or the banking sector. Figures that came out this week show a lack of lending, which is a problem, given that a group of the banks is owned by the state and that the UK’s credit rating has been downgraded from AAA status.
That means that it is more important for us to press the questions about why the member state is not doing its utmost to draw down the funding to which it is entitled. That is mentioned in the “Brussels Bulletin” under the heading for the LIFE+ programme. It is lamentable. The UK could be drawing down all sorts of money, but the national Government is so busy bleating about the money that we are putting in that it will not even think about the money that could be drawn down. It is outrageous.
Committee members have expressed concerns at a previous meeting about the European structural funds situation; you will know that I had a topical question lodged that week for the Deputy First Minister. We are drawing up plans to take that forward and to bring the Deputy First Minister before the committee. It might take a wee while to organise that, but Helen Eadie is right: if we impress this on the Scottish Government, it will have the opportunity to impress that on the UK Government.
I am conscious of the time; some members need to get to the chamber for general questions. There is one more point in the “Brussels Bulletin” that I wanted to pick up, which is the UK Government’s breach of the directive on minimum VAT rates on insulation materials. We should raise that with our colleagues on the Rural Affairs, Climate Change and Environment Committee because it is about the Government’s new green deal programme, and that is something that we are interested in, given our climate change targets.
Under “Upcoming Events and Meetings” I see the agriculture and fisheries council is meeting twice. Do we need additional representation at that to lobby for our case? I know that our minister will probably be there, but do we need anyone from the committee to be there?
I have a couple of things to say about that. I know that Richard Lochhead, who is the Cabinet Secretary for Rural Affairs and the Environment, has an impressive record of attendance at council meetings—I think that he has not missed one. I am not certain that he will attend the next one, but I suggest that his record indicates that he will.
I will be in Brussels next week, where I will be doing quite a bit of work on fisheries, so I should be able to pick up on what is going on and report back to the committee on what I have learned. We should have adequate resources out there, but it is an issue to keep an eye on. The meeting that is coming up is important, but the one after it, which will take place towards April, will be more important because some of the key fisheries issues will be put to bed.
I would like to go one stage further and suggest that we formally agree to allow you to make the decision to provide a presence at the meeting, if it is needed at short notice. That would mean that you could attend without having to seek the committee’s permission. Given that it is such an important event, I think that we should have that flexibility.
That would be welcome. The only thing that I would say about formal council meetings is that it is the UK that chooses the delegation. Is that right?
Yes, it is.
I am looking at the issue from the Scottish Parliament’s point of view. If we felt that an issue is so important that we need additional representation, you should not have to come back to the committee to get permission.
If the convener is content to take that responsibility—
I may look for volunteers.
We will send the “Brussels Bulletin” to the relevant committees and will highlight specific points to them.