After the new elections to the European Parliament, the Economic and Monetary Affairs Committee resumed its work again this week. It will play a central role in democratically coping with the causes and consequences of the financial and economic crisis. The only spoke in the wheel: Conservatives and Liberals have a clear majority and don’t want any of the strict regulations after the elections.
20 draft proposals of the Commission in the codecision procedure and 11 other initiatives. That is what the more than comprehensive working programme of the Economic and Monetary Affairs Committee of the European Parliament looks like. And one could sense the weight of expectations on the MEPs when they met in Brussels this week. After all, their scope of responsibility embraces all European plans for regulating the financial markets to prevent a similar disaster from happening again in future. These include among others plans to regulate hedge funds and private equity companies, stricter rules for banks, the containment of speculation and derivatives, the future of the so-called Lisbon Strategy, but also the limitation of manager salaries and bonuses, which were simultaneously discussed in Brussels by the ministers for finance and economic affairs.

In view of the vast number of initiatives it is of no surprise that some MEPs – in particular subsequently to an information exchange with members of the US House of Representatives – complained that the European Parliament with its personal and financial resources would lag miles behind other legislative organs. The German Social Democrat Udo Bullmann for example reckoned that good expertise would be necessary, which could not just come from the financial lobbies.

First debate about hedge funds: Conservatives and Liberals are already back paddling
A good example for the omnipresence of the financial lobby was provided by the newly appointed rapporteur of the EP for this dossier, the Conservative Frenchman Jean-Paul Gauzès in the following 1st debate on the Commission Draft on Hedge Funds and Private Equity Firms. He freely admitted to having recently met the Mayor of London and representatives of the “City”. “We talked about the importance of the financial industry for London, not about a twinning arrangement”, said Gauzès wittily. The regulation of hedge funds would be a difficult subject; there was actually no reason to regulate them as they did not cause the crisis. Similar the arguments of the “European Conservatives and Reformists”, hence the Euro-sceptics, and the Liberals. Does the Commission try to redirect business from London to Frankfurt or Berlin is the rhetorical question of Syed Kamall, shadow rapporteur for the British Euro-Sceptics and constituency MP in London. And the German Liberal MEP Wolf Klinz summarized the credo of the Liberals in a comprehensible manner: “The world becomes more complex with each new regulation!” Interesting is also the argumentation of the new chairperson of the committee, the British Liberal Sharon Bowles: pension funds would need hedge funds in order to achieve high profits for the pensions of employees.

In contrast, the German Social Democrat Udo Bullmann and the shadow rapporteur for the Greens, the Frenchman Pascal Canfin, came out in favour of further improvements to the Commission proposal. Many critical aspects would have to be considered in case of hedge funds, for example the intransparency of the industry, the high degree of debt and the short-term orientation. That is why clear rules and high standards would be required. Canfin also came out in favour of making the funds themselves and not only the managers subject to regulations.

On 6th October, the Parliament will hold a 2nd debate on hedge funds. The Member States want to finalise the document in a first reading by the end of the year and are currently putting time pressure on the EP. All MEPs agreed that it would be difficult to keep to this time schedule.

Financial lobby: a little bit of cosmetic for the public and carrying on as usual
The AK supports a stricter regulation of hedge funds and holding companies and has submitted its position in a statement to the Commission. From informed circles and from contributions to the debate in the European Parliament it becomes clear that the financial lobby already has pulled out all the stops to further dilute the already holey proposal of the Commission. Strict regulations for the causers of the financial crisis, the financial industry, were apparently en vogue before the EP elections. Now that the Conservatives have a reassuring majority in the EP, one has to assume that “cosmetic regulations” have once again entered the agenda.