EU Internal Market Commissioner Michel Barnier has really thrown down the gauntlet to the financial industry’s domineering lobby, not only in the European Union but, by extension, in the U.S. as well because American banks are so entrenched in Europe.
Barnier’s move to implement his pledge last January to democratize “expert groups” advising the European Commission and EU is explained in a story at EUobserver.com by Leigh Phillips. Barnier has requested that the “expert groups” include greater representation from consumer groups, trade unions, small businesses and NGOs. It is a brave move because the finance lobby has become so dominant in any EU (or U.S.) legislative or supervisory initiatives that they often provide the actual text used in final legislation. In the long battle to approve the EU’s remarkable new financial and regulatory structure (see Horne’s recent article in European Affairs) These lobbies in Brussels, notably through the 25 expert groups advising the EC – which they have been accused of dominating in the past -- were able to water down key powers of the new European Supervisory Authorities (ESA) and to delay their implementation across the 27 EU countries – just as the U.S. banking-financial lobbies in Washington were able to dilute and delay the new Dodd-Frank regulatory legislation in the U.S.
Barnier’s move to review and rebalance the expert groups comes after final approval of the EU’s new ESA legislation in July. The timing may indicate he believes there is political backing from the key governments, notably Berlin and Paris. It remains to be seen (indeed, it seems doubtful) whether Britain – with its financial center in The City and its Tory-led government – will agree to any watering down of London’s clout in Brussels, particularly if it led to more regulatory constraints on London’s dominant position in European banking. London may resent Bernier’s move as possibly prompted by a non-too subtle desire by Paris and Berlin to weaken The City.
U.S. financial institutions which have a major role in London and on the Continent will also be anxious to maintain their influence on the Commission, particularly as the new European and Dodd-Frank supervisory structures are put into place over the next several years. They will fully support EU colleagues who are resisting Barnier’s initiative.
Both European and U.S. lobbies will argue that they offer the EC and Congress the best expertise on highly technical issues. In independent analysts’ view, Barnier is absolutely justified in his concern about the inordinate influence that the banking-financial lobby has in ensuring that legislation, regulation and supervision is “finance-friendly” in both the EU and the U.S. Could U.S. legislators take similarly courageous action against the banking lobbyists working closely with Congressional legislators? With the Republicans now in control of the House, any such move seems to be ruled out.
Independent international market economist J. Paul Horne was a managing director and international economist at Smith Barney/Citigroup. Based in Europe and the U.S., his email is JPH12Econ@verizon.net