The autumn work of the European Parliament and the other European institutions in Brussels is in full swing again. At the very top of the agenda is the regulation of the financial markets. The finance lobby, however, hopes that the eagerness of the politicians, to impose regulations on the financial sector at last, would ease under the impression of a possible recovery of the economy. In the meantime, the lobbyists position their troops in Brussels. Latest example: the hedge funds.
Financial industry: to forget is human
The calculation of the financial sector and its lobbyists is simple. There would probably be not much left of the initial enthusiasm generated by national and European politicians to put at last a leash on the financial sector after years of deregulation and moreover, the public too would gradually lose interest in the subject. This is added by the fact that following the European Elections and the German federal elections, the political situation is quite favourable to the financial industry. The financial sector is hoping that the majority of regulation proposals, which the Commission has already submitted or announced will - in a primarily market-friendly EP and in a circle of Member States, which are also predominantly governed by Conservatives - be watered down beyond recognition. Merely and simply “Business as usual”. With this last master piece of the financial industry, the tax payers would not only have provided amounts running into billions to save the financial sector from ruin. Now they would once again be asked to open their purses, when the politicians discuss necessary saving measures and cuts in social spending in order to reduce the pile of debt. Not to mention the more than serious situation in the national labour markets.

Billion-strong interests want to water down already holey proposal even further

This is a matter of billion-strong interests and in order to force them through the industry is taking charge of a lot of money. The latest example is the political discussion currently taking place in Brussels concerning the Commission proposal to regulate hedge funds and private holding companies, a branch of the economy, which administers about 400 billion Euros in the EU alone. Even before the European Elections, the Commission had submitted a proposal to regulate this sector, which in the opinion of many experts and critics - including AK - is extremely weak. But even this weak proposal proves to be too much for the finance lobby.

Social partners are not included in Austrian opinion making
The proposal of the Commission is currently discussed both in the European Parliament and by the Member States. And the lobbies of the financial industry are already active at all levels. The group of those in the Member States, who want to further dilute the Commission proposal, is led by the British. They want to preserve the dominant position of the City of London at any cost, whereby they don’t care much about the stability of the global financial system. So far, France and Germany have come out in favour of tightening the rules. It remains to be seen which impact the change of government in Germany will have on the Germans with regard to the subject of regulating hedge funds. It is not quite clear, which line will be taken by Austria, in particular as curiously enough the social partners are not included in drafting the Austrian position. In taking this line of action, important workers’ interests - one only needs to think of the so far insufficient information of the workforce in cases where their company is taken over by a Private Equity Fund, whose debts are later dumped on the company - and consumer interests are simply ignored.

Finance lobbyists canvassing from door to door in the European Parliament
The European Parliament too began its work on the subject. The parliamentary rapporteur of the relevant committee will be the Conservative Frenchman Jean-Paul Gauzès, who already successfully completed the EP Report on rating agencies. And an Austrian will also be rapporteur on hedge funds, the Social Democrat Evelyn Regner for the Legal AffairsCommittee. Many MEPs report that the representatives of the finance lobby go in and out of parliamentary office doors in quick succession, whereby they are taking their main arguments from a new “study”, which was recently published by an “independent” think tank.

Method of dodgy lobbying: hiding behind an “independent” think tank

The so-called think tank adopted the name “Open Europe”. Its main residence is in Great Britain and behind it are the interests of the financial industry and the banking centre London. Hence it is no surprise that its philosophy concludes that the political project Europe had already gone far too far and should therefore be reversed. This is also reflected in the “study” on hedge funds. Tenor: Hedge funds and private equity are not to blame for the crisis; they create a lot of jobs and pay a vast amount of tax. Apart from hampering the growth of the industry, the proposal of the Commission would cost the industry up to EUR 2 billion in the first and about 1 billion in subsequent years. Conclusion: the Commission proposal had to be “improved radically”.

What about the interests of employees and consumers?
The approach of the financial industry in case of hedge funds regulations is typical for the lobbying tactics of financially strong particular interests. “Independent” think tanks are commissioned to prepare “studies”, the “results” of which are used to for argue in public and to lobby policy-makers. It is high time that this “Billion-Dollar Game” behind the scenes, would also take the overall social interests and the justified concerns of the broad population into account, in particular of employees and consumers within the meaning of transparency and pluralistic democratic opinion making. In the interest of democracy, a “carry on as usual” cannot be an option.

Further information:

Report by Open Europe on hedge funds

AK position on hedge funds