AEIP Newsletter • Week 22

31 – 04 June 2010

Table of Contents

EU FINANCIAL SERVICES............................................................................................................................... 2
I. BANK COMMISSION TO CONSULT OVER DETAILS OF SHORT SELLING ................................................................ 2
II. HOW TO IMPROVE FINANCIAL INSTITUTIONS' CORPORATE GOVERNANCE ........................................................ 2
EU INTERNAL MARKET .................................................................................................................................. 2
I. PREPARING FOR EUROPEAN SUMMIT AND TASKFORCE MEETING ...................................................................... 2
II. COUNCIL REAFFIRMS NEED FOR EACH COUNTRY TO TIGHTEN ITS BELT AS APPROPRIATE ................................ 3
EU HEALTH ......................................................................................................................................................... 3
I. MEMBER STATES SPLIT OVER GIVING HEALTHCARE INDUSTRY LONGER TO PAY ITS BILLS ............................... 3
II. PUBLIC CONSULTATION EXERCISE ON USE OF ICT FOR ELDERLY .................................................................... 4
EU SOCIAL AFFAIRS......................................................................................................................................... 4
I. EUROPE'S UNIONS FLEX MUSCLES AGAINST AUSTERITY PLANS ......................................................................... 4
II. COMMISSION DECISIONS IN CASES CONCERNING BELGIUM, ITALY AND SLOVAKIA ........................................ 5
III. PARLIAMENTARY COMMITTEE CALLS FOR EUROPEAN YOUTH GUARANTEE AND EUROPEAN QUALITY
CHARTER ON TRAINEESHIPS ................................................................................................................................ 5
IV. AMIC TO PUSH CORPORATE GOVERNANCE WITH EU PAPER.......................................................................... 6
V. ECON REVISES PROPOSED DERIVATIVES RULES ............................................................................................. 6
VI. EC ISSUES GREEN PAPER ON CORPORATE GOVERNANCE ................................................................................ 7
VII. EC WARNS ITALY OVER PENSION AGE DISCRIMINATION ............................................................................... 7
VIII. AMENDED EU DIRECTIVE TARGETS RISK IN BANK BONUSES ....................................................................... 8
IX. ABP AND EC MOVE CLOSER TO ELIMINATING 'DISCRIMINATORY' TAX LAWS ................................................ 8
ECONOMY ........................................................................................................................................................... 9
I. TO MAKE EUROPE MORE ATTRACTIVE, VAN ROMPUY WANTS ECONOMIC GOVERNANCE AND TARGETED
GROWTH STRATEGY ............................................................................................................................................. 9
II. GERMANY, AUSTRIA AND PORTUGAL SENT TO EUROPEAN COURT OF JUSTICE OVER DISCRIMINATORY TAX
RULES .................................................................................................................................................................. 9

EVENTS AND COURT CASES........................................................................................................................ 10

ND
I. 2 ANNUAL TRANSATLANTIC CONFERENCE.................................................................................................. 10
II. BARROSO MEETS EUROPEAN SOCIAL PARTNERS ........................................................................................... 10
III. SOCIAL INCLUSION INDICATORS, HEALTH AND PENSION INEQUALITIES AND SOCIAL SECURITY ON COUNCIL
AGENDA FOR 7 JUNE .......................................................................................................................................... 10
IV. EUROPEAN COURT OF JUSTICE CALENDAR" ................................................................................................ 11
IN DEPTH ANALYSIS ...................................................................................................................................... 12
I. TO MAKE EUROPE MORE ATTRACTIVE, VAN ROMPUY WANTS ECONOMIC GOVERNANCE AND TARGETED
GROWTH STRATEGY ........................................................................................................................................... 12
II. SOCIAL INCLUSION INDICATORS, HEALTH AND PENSION INEQUALITIES AND SOCIAL SECURITY ON COUNCIL
AGENDA FOR 7 JUNE .......................................................................................................................................... 14

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EU Financial Services

EU Financial Services

I. Bank Commission to consult over details of short selling

On Wednesday 2 June 2010, EU Internal Market Commissioner Michel Barnier said that the European
Commission would be opening a public consolation exercise the following week on short-selling,
examining transparency, scope of certain short-selling to be banned (securities or bonds), harmonising
Member States' legislation and EU coordination of the various measures. New EU legislation may be
published in September (a timing requested by Germany). To the surprise of other EU countries,
Berlin recently banned naked short-selling of sovereign debt and is deciding whether to extend the
ban to other products. (02/06/2010 Agence Europe)

II. How to improve financial institutions' corporate governance

Although corporate governance was not directly responsible for the economic crisis, the European
Commission believes that the lack of control contributed to excessive risk-taking by banks and other
financial instructions and has therefore opened a period of reflection (until 1 September 2010) on
corporate governance and pay policy in financial institutions. Unveiling the European Commission's
Green Paper on Wednesday 2 June 2010, EU Internal Market Commissioner Michel Barnier said the
financial crisis had shown that a lot of directors were unfit for purpose, as diplomats put it. The Green
Paper looks are four areas - the role and powers of management boards; risk management; the role of
external auditors; and the role of shareholders. The Commission will present a policy document after
the summer break and this may lead to new legislation being unveiled early in 2011. A second Green
Paper will be adopted early next year to examine corporate governance in companies listed on the
stock exchange and private companies (not on the stock exchange). To give boards of managers a
greater role in financial institutions, the Commission is consulting stakeholders on the option of
restricting the number of companies any one individual on a management board can work in to, for
example, three, and the option of ensuring a diversity of advice. The idea of separating the jobs of
Chair and Chief Executive Officer is also being mooted for financial bodies. When it comes to risk
management, the Commission believes that the authority of the person responsible for risk
management on a board has to be boosted and be put on a par with the financial director. A risk
committee could be set up on management boards to make public statements about the financial
institution's risk policy. Pay and bonuses. The Commission will be looking at implementation of its two
2009 recommendations requiring publicly quoted company directors' pay to be linked to the company's
performance (see EUROPE 9892). The Commission is examining whether to publish EU legislation in
other areas, restricting stock options and golden parachutes, for example. (02/06/2010 Agence
Europe
EU Internal Market

EU Internal Market

I. Preparing for European summit and taskforce meeting

EU27 finance ministers will be meeting in Luxembourg on Tuesday 8 June for an ECOFIN Council to
prepare for the upcoming European summit. At the Monday 7 June 2010 Eurogroup meeting,
eurozone finance ministers will fine-tune the Financial Stabilisation Mechanism devised on 9 May (see
EUROPE 10137), deciding on various issues which remained under discussion (see EUROPE 10141).
A discussion will then be held on economic governance at the taskforce chaired by Herman Van
Rompuy… …Other issues. Several other issues will be decided upon on Tuesday without debate, like
(a) a conclusions document on the way public policies can best ensure sustainable and sufficient

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retirement pensions. The ministries will repeat their support for a three-pronged approach: - rapidly
reducing debt levels; - increasing productivity and employment rates; and - changing pensions,
healthcare and long-term care systems; (b) general guidelines on changes to the European
Investment Bank's mandate for action outside the EU, as part of the mid-term review. The ministers
will approve the activation of an optional €2 million suggested in 2006 when the total amount of EIB
financing outside the EU was decided for 2007-2013. The additional €2 million will be used to tackle
climate change in eligible countries. Other changes involve the Council allowing the EIB to fund
projects in Iceland, Libya, Belarus, Cambodia and Iraq. The formal decision will be made by the
Council of Ministers and EP in codecision; and (c) general guidelines on a draft Regulation to improve
the quality of statistics used in the excessive deficit procedure, which would give Eurostat the power to
audit countries' statistics. Following the European Commission's unveiling of draft legislation to this
effect (see EUROPE 10078), the Council lays down the conditions for any methodological visits that
might be made by Eurostat, giving examples of when they would be appropriate. The EP, which is
being consulted on the issue, will state its views at the July plenary. (04/06/2010 Agence Europe)

II. Council reaffirms need for each country to tighten its belt as appropriate
The EU's state economic recovery exit strategy states that member states shall start to consolidate
their public finance next year at the latest, explains a report to be published by the ECOFIN Council on
Tuesday 8 June and then submitted to EU heads of state at the European Summit. The document
points out that in line with their individual situation, a number of countries have already started reining
in public spending (under pressure from the market, especially Spain and Portugal), adding that
greater detail and credibility are required for countries' budget adjustment plans in general: “a delicate
balance must be struck between averting adverse market dynamism through frontloading and securing
the conditions most conducive to successful fiscal consolidation by taking into account countries'
specific conditions.' All the countries covered by excessive deficit proceedings say they will get their
budgets back to within the 3% cut-off point in the required timeline, but some will have to step up their
planned structural adjustments if they are to actually achieve this. The budget consolidation process
will differ from one member state to the next, the report points out, but all member states should take
further measures, where required, to achieve their budget objectives within the deadline (2010 or
2011). Such measures must be permanent and focus on spending (income-based measures will be
less effective because of their negative impact on growth). Member states will also have to achieve
their medium-term objectives of moving towards a balanced budget in a reasonable timeframe, adds
the report. (04/06/2010 Agence Europe)

EU Health

EU Health

I. Member states split over giving healthcare industry longer to pay its bills
Progress is slow in the talks at the Council of Ministers over the draft amendment to EU Directive
200/35/EC on invoice payment deadline. One of the stumbling blocks is whether some industries, like
healthcare, should be given longer than the normal 30 day deadline for public authorities to pay their
bills. In a compromise bid submitted to the member states' delegations earlier in the month which
EUROPE has seen, the Spanish Presidency introduces exemptions to the general 30-day rule. Over a
three to five-year transition period, healthcare industry public authorities would have 60 days to pay
their bills. Twelve member states (Germany, Austria, Denmark, Estonia, Finland, Ireland, Italy, the
Czech Republic, the Netherlands, Poland, Slovenia and Sweden) and the European Commission
oppose the idea of industry sector-specific exceptions. France is pushing strongly for derogations for
state hospitals so that they always have 60 days to pay their bills. Six member states (Belgium,
Bulgaria, Cyprus, Greece, Poland and Romania) support France in this. The European Parliament's

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internal market committee supports the French view (see EUROPE 10128). The Spanish Presidency
also suggests that parties should be able to mutually agree to not abide by the general 30-day rule for
contracts for the buying and selling of land and buildings and the supply of financial services to raise
capital, and also when granting public contract under public competitive tendering when public
authorities negotiate the terms of contracts with potential private partners. When it comes to penalties
for public authorities that do not meet their payment deadlines, the Spanish Presidency scraps the
idea of levying a surcharge of 5% of the amount due that was initially suggested by the European
Commission. The EP suggests the same thing. Backed by Denmark and Lithuania, the Netherlands
suggests a 2% surcharge to a maximum of €50,000, in addition to damages for costs arising from
chasing the overdue invoices. The Spanish Presidency has set a range of amounts for damages
depending on the size of the overdue invoice in question. MEPs suggest a fixed €40 for damages.
Earlier this month, the European Parliament postponed voting in plenary on the draft report by Barbara
Weiler (S&D, Germany) because it wants to reach agreement with the Council of Ministers in first
reading. It is hard to say at this stage whether the EP and Council of Ministers will bring this off.
(28/05/2010 Agence Europe)

II. Public consultation exercise on use of ICT for elderly

On Thursday, the European Commission launched a consultation exercise, inviting citizens,
businesses and researchers to share ideas on how best to use information and communications
technologies (ICTs) to help older Europeans live more independently, and, more generally, to
establish new ways of putting ICTs at the service of the most vulnerable members of society. The
consultation will be led by a high-level panel established to advise the European Commission on the
functioning of the “Ambient Assisted Living joint programme”. The panel is chaired by former European
Commissioner Meglena Kuneva. The public consultation, which will run until 1 July 2010, is the first
step towards meeting the target of doubling the take-up of independent living arrangements for the
elderly by 2015. (04/06/2010 Agence Europe)
EU Social Affairs

EU Social Affairs

I. Europe's unions flex muscles against austerity plans

Italy's six-million strong CGIL union announced a nationwide stoppage on June 25 to be preceded by
protest rallies around the country two weeks earlier, while Greece's private sector union GSEE said it
would strike next month against pension reform. While Portugal's largest labour group girded for a
mass protest through the streets of Lisbon on Saturday, Spain's unions kept up their threat of a
general strike as talks with the socialist government over labour reform remained deadlocked.
Pressure on Madrid Pressure on Madrid to push ahead with the reforms grew on Friday after ratings
agency Fitch cut Spain's credit rating to AA-plus from AAA on Friday, saying it expects a very slow
economic recovery in the next few years as a result of fiscal austerity measures. Fitch said it won't
downgrade Spain's ratings again in the next 12 months despite an expected deterioration in public
finances. The unions have already promised a public sector strike over pay cuts. As workers in all four
nations resist government attempts to push through painful budget cuts, the leader of Greece's GCEE
said he would lobby counterparts around Europe to take joint action, a call quickly supported by Italy's
left-wing CGIL. "In this moment we need initiatives at a European level," CGIL leader Guglielmo
Epifani told Reuters on Friday, adding this will be his union's position at a meeting of European unions
in Brussels on 1 June. Portugal's CGTP union confederation said its rally this weekend was only the
first step in protest at an austerity plan including tax hikes and a freeze on civil servants' pay. "It's a
stage of a continuous struggle that will intensify," Armenio Carlos, a member of the CGTP's national

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leadership committee, told Reuters. "We're leaving all options open, including calling a national
general strike." Austerity spreading An increasing number of European countries are announcing
austerity measures to placate nervous bond markets in the wake of Greece's debt crisis. Spain,
Portugal, Britain, Italy, Holland and France all announced new steps in recent weeks. While unions
have tended to respond with hostility, complaining that the poor and public sector workers are being
made to pay the cost of the mistakes of the rich, analysts say the chances of co-ordinated protests all
over Europe are slim. They point to divisions in trade union movements in some countries, including
Italy and Portugal, while in northern Europe, voters already angry at having to bail out Greece are
unlikely to tolerate disruptions caused by any show of solidarity. In Italy, CGIL chief Epifani was bitter
that the country's other main union confederations, the CISL and the UIL, were not joining the planned
four-hour stoppage around the country. "All around Europe the unions strike together, and it's strange
that we in Italy have the most unfair budget and two unions that support it," he told Reuters. Despite
the growing strike calls in southern Europe, there are also signs the appetite for protest among unions'
members may be limited. In Greece, whose debt crisis sparked the austerity drive around Europe, a
march last week drew only half the crowd seen in protests on 5 May, while in France the government
signalled it would push ahead with plans to raise the pension age after weak protests. "The public
support just isn't there," said David Lea, Western Europe analyst at Control Risks. "The unions will
need to take some action to avoid accusations of irrelevance but it will be limited." (31/05/2010
Euractiv.com)

II. Commission decisions in cases concerning Belgium, Italy and Slovakia

On Thursday 3 June, the European Commission took a stance on three cases, two of which pertain to
equal treatment in the employment field (Belgium and Slovakia) and the other to equal pay (Italy).
Thus: (1) The Commission decided to close the case against Belgium for failing to communicate
national measures to implement European Union rules against gender discrimination in employment
(Directive 2006/54/EC - recast). The proceedings had been opened in September 2009 because the
authorities had failed to communicate the transposition of EU legislation in the German-speaking
community. In reply to the Commission's reasoned opinion sent in March 2010, Belgium put the matter
right, thus allowing the Commission to close the case against it. (2) The Commission took further legal
action against Italy to bring it into line with the EU Court of Justice ruling of 13 November 2008 (Case
C-46/07) whereby different pensionable ages for male and female civil servants violates the principle
of equal pay. Following infringement procedure brought by the Commission, Italy introduced new rules
to comply with the Court's ruling. In a complementary letter of formal notice under Article 160§1 of the
Treaty on the Functioning of the European Union (TFEU) and adopted on Thursday, the Commission
maintains that provisions taken by Italy - under which retirement age for female employees would
increase gradually and only be equalised at the same age as men in 2018 - are inadequate and that
discriminatory treatment continues. (3) The Commission sent a reasoned opinion to Slovakia after it
incorrectly implemented EU rules against gender discrimination in employment, vocational training,
promotion and working conditions (Directive 2002/73/EC) into national legislation. The final date for
transposing the directive into national law was 5 October 2005. (04/06/2010 Agence Europe)

III. Parliamentary committee calls for European Youth Guarantee and European Quality Charter
on Traineeships
In order to promote young people's access to the labour market, the employment and social affairs
committee suggests the Council and Commission should present a “European Youth Guarantee” to
give every young person in the EU the right to a job, an apprenticeship, further training or a job
combined with training, if they have been out of work for six months. This is the idea set out in the
report by Emilie Turunen (Greens/EFA, Denmark), adopted by 42 votes in favour, one against and 4
abstentions by the parliamentary committee meeting in Brussels on Thursday 3 June under the
chairmanship of Elizabeth Lynne (ALDE, UK). MEPs also call on the Commission and Council to
develop a “European Quality Charter on Traineeships” in order to ensure the educational value of
these traineeships and to avoid exploitation. This charter should lay down time limits on internships, a
minimum allowance based on the standard of living costs of the place where the internship takes

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place, and social security benefits. In order to allow young people to become financially independent,
MEPs call on member states to guarantee young people a decent income. The committee sees some
national laws as discriminatory as they prevent young people from being financially independent. This,
for example, is the case in the United Kingdom where the minimum wage is lower for the young, in
France where there is limited access to the “active solidarity income”, and in Denmark where young
people receive reduced unemployment benefits. Emilie Turunen points out that, in the context of the
current economic crisis, the rate of unemployment for young people increases faster than the average
rate. In December 2009, 5.5 million young people under the age of 25 were unemployed in the EU,
which corresponds to 21.4% of all young people. The vote on this report will be held in EP plenary
session in July 2010. (04/06/2010 Agence Europe)Economy

IV. AMIC to push corporate governance with EU paper

The Asset Management and Investors Council (AMIC) is working on a corporate governance paper in
conjunction with the European Union. The aim of the paper is to encourage asset managers to
address corporate governance issues and increase their transparency to clients. Corporate
governance is one of the biggest topics concerning institutional investors in Europe, according to Bob
Parker, AMIC chairman and senior advisor at Credit Suisse. “But while the asset management industry
should have been more aggressive in terms of corporate governance it cannot be blamed for the
financial crisis alone,” he said. Parker says the other main issue is the securities valuation of illiquid
assets or assets in illiquid markets. “It is a very difficult but hot subject at the moment,” he said. “One is
questioning whether everyone is correctly pricing the securities in their portfolio, such as Spanish
savings banks valuing the real estate assets in their portfolio. What are they valuing and why?” Parker
has also identified an ongoing trend in asset allocation towards absolute return products and passive
indexation, particularly in illiquid markets. “In less liquid markets, investors want to employ active
managers, while in liquid markets such as the US they tend to use indexation. The gold market is a
good example of that,” he said. “The alternatives industry is all over the place. There is a lot of interest
in infrastructure by pension funds, but there are also a lot of walking wounded in the private equity
industry at the moment.” An AMIC working group is also in the process of setting up a charter on
private banks, which is expected to be published in late July. AMIC was set up in 2007 under the
auspices of the International Capital Market Association (ICMA) to represent the global asset
management industry and investors on a supranational basis. Its members include asset managers,
pension funds, banks, insurers, sovereign wealth and hedge funds. (02/06/2010 IPE.com)

V. ECON revises proposed derivatives rules

The European Parliament’s Economic and Monetary Affairs Committee (ECON) today voted (02 June)
in favour of a compromise version of its proposed new legislation for over-the-counter (OTC)
derivatives. Nearly all members showed support for rapporteur MEP Werner Langen's revised
wording, which sought to distinguish between derivatives used as a "risk management tool for hedging
a real underlying risk" and those "used solely for speculation". Langen’s revised proposals, which were
supported by ECON members voting 43 for, with only one against, called for “better regulation of
derivatives, and in particular OTC derivatives … by the use of trade repositories and centralised data
storage, the use and the strengthening of central clearing houses, and the use organised trading
venues”. Despite this, pension fund sources indicated that anxiety was being expressed by the
pensions industry over the danger of being lumped together with speculators when the final version of
the legislation is published. While corporate interests are being given understanding, pension funds
are yet to see same treatment, it was said. Werner's recommendations included a call, “as a matter of
priority”, for credit default swaps (CDS) to be made subject to independent central clearing and for as
many derivatives as possible to be settled centrally by central counterparties (CCP). It was also
suggested that individual types of derivative with cumulative risks should, if necessary, only be
conditionally authorised, or even, on a case-by-case basis, prohibited. Members also voted for the
need for sufficient capital and reserves should to cover CDS "in the case of a credit event”. The
European Commission is expected shortly to issue the results of a public consultation prior to
publishing its own proposals for the legislation, expected in July. (02/06/2010 IPE.com)

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VI. EC issues green paper on corporate governance

The European Commission plans to require institutional investors to publish their voting and
engagement policies and records, and "adhere to stewardship codes", a green paper on corporate
governance has revealed. The draft regulations, which are open to consultation until 1 September
2010, have been issued in response to "numerous failings" by financial institutions, such as insufficient
oversight of senior management by boards, a lack of independence and authority in risk management
functions and a failure by shareholders to exercise control of management. Recommendations from
the Green Paper on Corporate governance in financial institutions and remuneration policies also include an
enhanced role of supervisory authorities in the review of corporate governance structures, making the
role of chief risk officer equal to chief financial officer, and separating the functions of chief executive
and chairman. On the recommendation relating to shareholder behaviour the Green Paper stated:
"Shareholders' lack of interest in corporate governance raises questions in general about the
effectiveness of corporate governance rules based on the presumption of effective control by
shareholders for all listed companies. Similarly, engaging shareholders presents a real challenge for
financial institutions". To motivate shareholders to engage with institutions, the document highlighted a
range of topics for focus, including voting disclosure, the use of discussion platforms to strengthen
shareholder cooperation and adherence to stewardship codes of best practice. One of the general
questions raised by the consultation was whether respondents believed shareholder control of
financial institutions was "still realistic" following the recent failings. The role of supervisory authorities
in relation to corporate governance was also under review, including proposals to create a duty for
supervisory authorities to check the correct functioning and effectiveness of the board of directors, and
to regularly inspect the risk management function to ensure its effectiveness. It also noted that
cooperation between supervisory authorities on corporate governance of cross-border financial
institutions "should be strengthened, particularly within colleges of supervisors but also in the context
of future European supervisory authorities". The scope of the paper is initially limited to financial
institutions, such as banks and life insurance companies, given these institutions "present specific
features which differentiate them from listed companies in general". But the Commission said it
"recognises that issues relating to corporate governance of listed companies more generally also
deserve to be addressed and has started work to this end. A further Green Paper will follow in the
autumn." Michel Barnier, Internal Market and Services Commissioner, said: "I am convinced that true
crisis prevention starts from within companies. If we are to prevent future crises, financial institutions
themselves need to change. "We need to ensure more effective internal controls. Promote better risk
management. Strengthen the role of supervisory authorities. And existing rules on sound remuneration
policies should be implemented quickly to help curb excessive risk-taking." Liz Murrall, director of
corporate governance and reporting at the UK's Investment Management Association (IMA) said: "We
will be carefully reviewing the proposals. Although the main focus appears to be on banks and life
companies, it is important that a "one size fits all" approach is not adopted and that the differences in
the underlying systemic risks that particular financial institutions pose are recognised." (03/06/2010
IPE.com)

VII. EC warns Italy over pension age discrimination

The European Commission has warned Italy it needs to comply with a European Court of Justice
(ECJ) ruling to equalise pension ages for civil servants or it may face another court hearing. In 2008
the ECJ ruled that Italy's civil servant pension scheme managed by INPDAP (national providence
Institute for the Employees of Public Authorities) was discriminatory by applying different pension ages
for male and female workers. The ruling followed on from an infringement process on the issue
initiated by the Commission in 2005. Italy announced in June 2009 it would be taking measures to
gradually equalise the ages by 2018, but the Commission has now issued the country with a letter of
formal notice requesting compliance with the judgement because the current proposals "allow
discriminatory treatment to continue". In a statement, the Commission noted the ECJ had confirmed
several times that civil servants' pensions must be considered as pay and as employer pension
schemes, and in June 2009 the Commission issued an earlier letter of formal notice against Italy
because it had failed to comply with the ruling. Italy stated last year it had introduced new provisions

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that would phase in an equal pension age for staff working in public service by 2018. The retirement
age for female employees would increase gradually and only be equalised at the same age as men –
whose legal retirement age is fixed at 65 – in 2018. However, the Commission has since argued that
according to EU case law "this transitional measure continues to apply discriminatory treatment and is
therefore inadequate". It stated: "The Commission has therefore decided to issue an additional letter of
formal notice to Italy under Art 260(1) TFEU asking the Italian authorities to comply with the
judgement". Should Italy still fail to take what the Commission deems appropriate action, the next step
could be for the country to be taken before the ECJ again, which may result in a second ruling with a
financial penalty for the member state. (04/06/2010 IPE.com)

VIII. Amended EU directive targets risk in bank bonuses

A new version of the EU’s Capital Requirements Directive, due to be voted on this month, will place
limitations on banks in relation to their remuneration packages, and could make them less risky as
investments for pension funds. The amended directive applies risk criteria to bonsues, whereby, if
payouts represent more than 25% of total surplus revenue, shareholders would have the right to vote
on the split of that surplus between capital remuneration and dividends. The draft legislation includes
penalties on sanctions in the case of a breach of these requirements and banks’ remuneration
policies. The proposed rules could render banks safer investments for pension funds, although they
could also potentially reduce the rate of return financial institutions produce. One pension fund
commented that banks have been “very risky” havens in the past and that the proposed measures
from Brussels were running “more in less in parallel” with those from the Basel Committee on Banking
Supervision. Support for improvements to risk management of the remuneration in important financial
institutions has come from the Association of British Insurers (ABI). The association stated that poor
remuneration practices may have contributed to the current financial crisis situation. It placed blame
on the Basel II Directive, which “created perverse incentives for banks to take on leverage, which the
banks naturally reacted to and rewarded staff for.” The ABI added: “The regulatory framework must be
reformed in this respect.” The new draft Capital Requirements Directive (CRD III) will come up for a
Committee vote in the European Parliament on June 14. Rapporteur for the draft Arlene McCarthy has
described a need for “radical action to put in place long term rules to ensure a responsible and fair
banking system, to restore consumer confidence and to tackle once and for a all the issue of bankers’
bonuses and remuneration practices”. If the Committee vote gains support – as is expected – a
confirmation will follow in plenary, expected in July, which would give “an indicative entry into force in
EU jurisdictions” in early 2011. (04/06/2010 IPE.com)

IX. ABP and EC move closer to eliminating 'discriminatory' tax laws

Unequal tax treatment of foreign pension funds in the EU took a step closer to being eradicated this
week after ABP claimed it had made a “breakthrough” with the Norwegian government and the
European Commission (EC) referred Germany to the European Court of Justice (ECJ) over its existing
legislation. Norway is the latest country to return dividend tax paid by ABP, which has now claimed
€60m in dividend tax payments from several countries, including Sweden, Denmark, Germany,
Austria, France, Italy, Spain and Portugal. The €210bn civil service pension fund said it had claimed
back €3m from the Norwegian government, a figure that could eventually rise to €10m, as part of its
ongoing campaign to win back dividend tax paid on investments in foreign juridictions. Meanwhile, the
EC has referred Germany to the ECJ over its dividend tax legislation, which it says discriminates
against overseas pension funds. Last October the Commission requested that Germany amend its
legislation, but the deadline for this has now been passed. Commission considers such legislation to
be inconsistent with the fundamental European Treaty freedom to move capital. “If a member state
levies a higher tax on dividends or interest paid to foreign pension funds, these funds might be
dissuaded from investing in companies in that member State,“ the EC stated. It is the latest in a line of
14 infringement proceedings by the Commission against member states. Proceedings against three –
Czech Republic, Estonia and Slovenia – have since been closed, following rectification of the
discrimination, while four – Finland, Portugal, Spain and Germany – are awaiting a determination from
the ECJ. ABP recently won important court victories in Spain and France. The French high court ruled

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that French legislation must be adjusted in order to cancel the unequal treatment of non-French
pension funds. ABP said the Inland Revenue of France was currently considering whether the Dutch
scheme complies with the conditions for exemption of dividend tax. In Spain the court of justice ruled
that the dividend tax for foreign pension funds hampers free movement of capital and is therefore
conflicting with EU legislation. But ABP revealed that Spanish authorities had lodged an appeal, which
has so far blocked repayment. “Recent rulings have increased our conviction that the difference in
treatment between local and foreign pension funds is not justified,” ABP stated. Pension consultancy
Towers Watson welcomed the Commission’s referral of Germany to the ECJ as a move towards a
level playing field for pension funds in Europe. “Having largely eliminated unlawful tax discrimination in
relation to contributions payable to a ‘foreign’ pension fund, the European Commission is determined
to remove discrimination in the area of dividend and interest payments”, said Dave Roberts, senior
consultant at Towers Watson. (04/06/2010 IPE.com)

Economy

Economy

I. To make Europe more attractive, Van Rompuy wants economic governance and targeted
growth strategy

On 2 June, European Council President Herman Van Rompuy opened the 8th World Investment
Conference (WIC) in La Baule, France, the theme of which is “Europe's attractiveness in a changing
world”. In a speech hailing the measures taken by the European Union to overcome the crisis with the
euro, Van Rompuy made clear his determination to put economic governance in place in the EU to
avoid the budget's running out of control and enhance the credibility of the euro, and to make his mark
on the European Council to speed up reform, promote long-term growth by making Europe more
attractive and to ensure the future of the European model.
In depth analysis page: 12

II. Germany, Austria and Portugal sent to European Court of Justice over discriminatory tax
rules
On Thursday 3 June, the European Commission decided to sent three member states, Germany,
Austria and Poland, to the European Court of Justice for infringing EU tax legislation. A) Austria will
have to explain why its rules require foreign banks and some foreign investment funds to appoint
Austrian-established tax representatives. B) Dividends paid by German companies to German
“Pensionskassen” are subject either to a reduced rate of withholding tax or the Pensionskassen can
get a partial refund of the withholding tax paid, but this does not apply to pension funds established
elsewhere in the EU. Dividends received from foreign pension funds are taxed more heavily than
dividends from German pension funds (Pensionsfonds). Germany will have to explain to the Court of
Justice why it operates a discriminatory tax system. C) Portuguese rules tax more heavily dividend
payments to foreign companies (withholding taxes of up to 20%) than those paid to companies based
in Portugal (which are tax-free or subject to a very low rate of tax). Based on case law (the Denkavit
Ruling, Case C-170/05), the Commission is sending Portugal to court. Belgium. Belgium is being sent
three reasoned opinions (written warnings) requiring it to changes its rules. A) People resident for tax
purposes pay a 15% tax on dividends paid by Belgian companies, mostly owned by individuals, but
dividends paid by similar companies established abroad have to pay 25% tax. B) Belgian investment
companies pay no tax on interest and dividend income from Belgium, but foreign investment
companies have to pay a withholding tax of 15% or 25% on interest and dividend income from
Belgium. C) Belgium is required to change its legislation applying 6% value-added tax (VAT) on the
provision of housing and certain building work. The lower rate applies to the first €50,000 with the

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 AEIP Newsletter • Week 22

31 – 04 June 2010

remaining amount being subject to the standard VAT rate of 21%. The Commission believes this
measure is being applied across the board but EU rules only allow reduced-rate VAT to apply to this
type of service supplied as part of a social policy and therefore challenges the legality of a member
state artificially separating off a section of a tax base to which lower VAT applies, while keeping the
normal VAT rate for the rest. (03/06/2010 Agence Europe)
Events and Court Cases

Events and Court Cases

nd
I. 2 Annual Transatlantic Conference
AEIP along with its North American partners, the National Coordinating Committee for Multiemployer
Plans (NCCMP) from the USA and The Multi-Employer Benefit Plan Council (MEBCO) from Canada,
nd
will hold the 2 Annual Transatlantic Conference on 09 - 10 June 2010 in Brussels. The overall aims
of this conference are to develop a transatlantic view on four specific issues effecting social protection.
This transatlantic view will then be pushed at the different national levels, aiming to prepare the
different heads of state to have a harmonized approach to social protection during the G20 summit.
The four issues to be covered during the conference are: 1. the impact of the financial crisis on
collectively managed pensions funds and the transatlantic reaction; 2. solvency, sustainability and
adequacy of pensions in North America and Europe; 3. a transatlantic comparison of healthcare and
its reforms; 4. policies of health and safety at work. Moreover, the conference will outline the
challenges faced by social protection in the USA, Canada and Europe and propose possible solutions
which would benefit all actors. To register please send an email to info@aeip.net.

II. Barroso meets European social partners

European Commission President José Manuel Barroso will be meeting the general secretary of the
European Trade Union Confederation (ETUC), John Monks, and the director general of
BusinessEurope, Philippe de Buck, on Friday 4 June during a working breakfast to discuss social
dialogue in Europe in the current context. During the meeting, the trade union delegation - composed
of John Monks, Joël Decaillon (ETUC Deputy General Secretary), Bernard Thibaut (General Secretary
of the CGT, France), and Yannis Panagopoulos (President of the GSEE, Greece) - will reiterate its
positions on austerity measures and on the need for growth in Europe (see EUROPE 10148). It will
also set out its priorities, namely: (1) The EU needs a recovery plan to stimulate growth through its
own development, as well as strong industrial policies based on a low-carbon approach and the use of
new technologies. (2) It is urgent to bolster fiscal coordination at European level. (3) The EU must
press on with its efforts to tighten financial regulations and develop new taxation revenues such as a
tax on financial transactions. The delegation will give the results of its executive committee on 1 and 2
June in Brussels, during which ETUC decided to begin a campaign against cuts in public spending
and in favour of growth. A “Euro-demonstration” will be held in Brussels on 29 September this year.
(03/06/2010 (Agence Europe)

III. Social inclusion indicators, health and pension inequalities and social security on Council
agenda for 7 June
In Luxembourg at the start of next week, the Employment, Social Policy, Health and Consumers
Council (EPSCO) will prepare its contribution to the European Council of 17-18 June with regard to the
new Europe 2020 strategy for jobs and growth. On Monday 7 June, employment and social policy
ministers will seek agreement on an EU target and appropriate indicators for promoting social
inclusion, in particular through poverty reduction. Spanish Labour and Immigration Minister Celestino
Corbacho Chaves and Equality Minister Bibiana Aido will chair discussions. The Commission will be

10
 AEIP Newsletter • Week 22

31 – 04 June 2010

represented by Employment, Social Affairs and inclusion Commissioner László Andor. Tuesday 8
June will be devoted to health issues.
In depth analysis page: 14

IV. European Court of Justice Calendar"

Date Case Language Courtroom

Hearing Association Belge des Consommateurs FR New Great

C-236/09 Test-Achats and Others - Social policy Courtroom
Court of Justice - Grand Chamber
Tuesday
01/06/2010 Reference for a preliminary ruling - Cour constitutionnelle (Belgium) - Validity of
09:30 Article 5(2) of Council Directive 2004/113/EC of 13 December 2004 implementing the
principle of equal treatment between men and women in the access to and supply of
goods and services (OJ 2004 L 373, p. 37) - Gender used as a criterion in assessing
risks and in the calculation of premiums and insurance benefits on the basis of
actuarial data and precise relevant statistics - Life assurance contracts -
Permissibility and justification for a difference in treatment?

Opinion Commission v France - Freedom of FR New Great

C-89/09 establishment Courtroom
Court of Justice - Second Chamber
Wednesday
02/06/2010 Failure of a Member State to fulfil obligations – Infringement of Article 43 EC – Rules
09:30 concerning the operation of bio-medical analysis laboratories – National legislation
limiting shareholdings by shareholders not carrying on a professional activity to 25 %
of authorised capital – Prohibition on holding capital in more than two companies
operating jointly one or more bio-medical analysis laboratories – Restrictions on the
freedom of establishment which may be justified by the objective of protection of
public health and are proportionate? Advocate General : Mengozzi

Opinion Koller - Freedom of movement for DE New Great

C-118/09 persons Courtroom
Court of Justice - Fourth Chamber

Wednesday Preliminary ruling – Oberste Berufungs- und Disziplinarkommission – Interpretation of

02/06/2010 Council Directive 89/48/EEC of 21 December 1988 on a general system for the
09:30 recognition of higher-education diplomas awarded on completion of professional
education and training of at least three years’ duration (OJ 1989 L 19, p. 16) –
Applicability of the directive in the case of an Austrian national who, on the basis of
the confirmation of his Austrian degree as equivalent and of additional study at a
Spanish university for less than three years, was registered with a chamber of
lawyers in Spain and, after exercising his profession in Spain for three weeks, applies
to be admitted to the aptitude test in order to qualify as a lawyer in Austria on the
basis of the authorisation to exercise his profession in Spain Advocate General
: Trstenjak

Judgment Commission v Spain - Free movement ES New Great

Thursday of capital Courtroom
03/06/2010 C-487/08 Court of Justice - First Chamber

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 AEIP Newsletter • Week 22

31 – 04 June 2010

09:30
Failure of a Member State to fulfil obligations – Infringement of Articles 56 EC and 40
EEA – Different treatment given to dividends distributed to domestic and foreign
shareholders
Advocate General : Mazák

Opinion Albron Catering - Social policy NL Courtroom III -

C-242/09 Court of Justice - Third Chamber Level 6

Thursday Reference for a preliminary ruling – Gerechtshof te Amsterdam – Interpretation of

03/06/2010 Article 3(1) of Council Directive 2001/23/EC of 12 March 2001 on the approximation
09:30 of the laws of the Member States relating to the safeguarding of employees’ rights in
the event of transfers of undertakings, businesses or parts of undertakings or
businesses (OJ 2001 L 82, p.16) – Company with all the personnel of a group of
companies which makes it available to operating companies of the group according
to their needs – Transfer of the activity of an operating company outside the group –
Classification Advocate General : Bot

Hearing Commission v Portugal - Freedom of PT Courtroom I -

Jeudi C-458/08 establishment Level 8
03/06/2010 Court of Justice - First Chamber
14:30
Failure of a Member State to fulfil its obligations – Infringement of Article 49 EC –
Construction sector – Licence required in order to carry on activity in that sector

Hearing Axa UK - Taxation EN Courtroom III -

C-175/09 Court of Justice - Third Chamber Level 6

Jeudi Reference for a preliminary ruling – Court of Appeal – Interpretation of Article

03/06/2010 13B(d)(3) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the
14:30 harmonisation of the laws of the Member States relating to turnover taxes – Common
system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) –
Exemptions – Scope – Meaning of ‘service that has the effect of transferring funds
and entail[ing] changes in the legal and financial situation’ – Collection, processing
and onward payment services for traders’ credits from customers – Payment plans
for dental care

In Depth Analysis

In Depth Analysis

I. To make Europe more attractive, Van Rompuy wants economic governance and targeted
growth strategy

On 2 June, European Council President Herman Van Rompuy opened the 8th World Investment
Conference (WIC) in La Baule, France, the theme of which is “Europe's attractiveness in a changing
world”. In a speech hailing the measures taken by the European Union to overcome the crisis with the
euro, Van Rompuy made clear his determination to put economic governance in place in the EU to

12
 AEIP Newsletter • Week 22

31 – 04 June 2010

avoid the budget's running out of control and enhance the credibility of the euro, and to make his mark
on the European Council to speed up reform, promote long-term growth by making Europe more
attractive and to ensure the future of the European model.

Improving Europe's attractiveness. “Europe's attractiveness is no longer taken for granted. I am not
only talking about the attractiveness of the European way of life for citizens. I'm also talking about
Europe's attractiveness to investors and entrepreneurs. In fact, it is this double attractiveness which
makes our continent unique. Europe's message to the world is that one can have both: economic
growth and social justice, efficient political decisions and democratic accountability, adaptation to the
times and preservation of one's heritage, a good place to invest and to live. I am convinced that the
world will move in the direction of the European model, sooner or later,” he said, though warning,
“Knowing that without robust economic infrastructure, the model is unsustainable”. Using the results of
the Ernst & Young annual barometer published on the same day (see related article) to back up his
arguments - results which demonstrated that, in 2009, Europe remained a favoured destination for
foreign direct investment, behind China - Van Rompuy said that attractiveness was not only a matter
of labour costs and taxation, but also stability, a viable regulatory framework, a well trained population
and access to a “large and sophisticated” market.

The euro test. In the face of the crisis in confidence in the euro, “decision-making was complicated,
but it was not blocked,” the president of the EU Council said, expressing satisfaction that the EU had
been able to overcome three major difficulties: firstly, that the treaties made no provision for
instruments to manage such situations, secondly, that Greece, for domestic political reasons, only
asked for aid on 23 April, and thirdly, that the German constitutional court's very strict interpretation of
the treaty ban on bail-outs means that Germany can only intervene ultima ratio. Despite these
difficulties, the EU's ability to act was evident once Greece had made its request for aid, Van Rompuy
went on, noting that action was in two stages, with, first of all, negotiation among the member states
associated with the IMF of a €110 bail out, subject to conditions, for Greece, then, when the risk of
contagion developed, with the adoption of a safeguard mechanism for the eurozone in the form of a
€750 billion package. Following the meetings of eurozone leaders and of eurozone finance ministers
on 7 and 9 May, “all the European institutions and member states assumed their responsibilities,” he
went on, pointing out that the Central Bank had changed its policy towards sovereign bonds, that two
member states had immediately announced further efforts to reduce their deficit and that others had
followed their example.

Economic governance, an imperative. These initiatives, Van Rompuy said, could be seen as a
whole, a common European effort. “These actions clearly show that the EU is able to act decisively.
They also show the strong political will to defend our currency and to guarantee economic stability,”
insisted the man who is working for an economic government of Europe and the Eurozone to avoid
any future sovereign debt crises. He said he was leading a task force, made up of the finance
ministers of almost all EU member states and representatives of the European institutions, including
ECB President Jean-Claude Trichet, which was focusing on three priority areas: stronger budgetary
discipline through strengthening of Stability and Growth Pact rules with improved early warning
procedures and new sanctions, a system to monitor differences in competitiveness between member
states, which includes sanctions, and better crisis management, with enhanced political cooperation
and coordination across all three. Everyone, he went on, now understood the need for strong
economic governance in the EU and in the eurozone, “We are working on it,” he said, ruling out the
risk of a further recession as a result of the budgetary austerity measures. “The euro is a
fundamentally sound currency. Eleven years of low inflation - under 2%, nearly perfect balance of
payments and an average budget deficit half the size of those of our major partners. Now we need
convergence in economic development and policies to underpin the credibility of our current currency,”
he added.

A targeted strategy for growth. All EU leaders know the reforms needed, Van Rompuy said.

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 AEIP Newsletter • Week 22

31 – 04 June 2010

Discussion, he said, was less about what had to be done than how to get there. Aims on paper had to
be translated into real political commitments, he said, highlighting the pressure he was bringing to bear
so that the European Council of 17 June 2010 will agree on a new growth and employment strategy
which focuses on five quantifiable economic objectives: research and development (R&D) and
innovation, education, employment, climate and social inclusion. He also said that the Council was
backing the European Commission on completing the internal market. Ahead of the G20 meeting in
Toronto, the Council president said the EU had to be a more effective international player. “The EU
has learnt the lesson in Copenhagen: the EU is not just the institutions in Brussels, but all the member
states together. No EU member state is a global player any more. There is no future for vanity of a
country alone”. (03/06/2010 Agence Europe)

II. Social inclusion indicators, health and pension inequalities and social security on Council
agenda for 7 June
In Luxembourg at the start of next week, the Employment, Social Policy, Health and Consumers
Council (EPSCO) will prepare its contribution to the European Council of 17-18 June with regard to the
new Europe 2020 strategy for jobs and growth. On Monday 7 June, employment and social policy
ministers will seek agreement on an EU target and appropriate indicators for promoting social
inclusion, in particular through poverty reduction. Spanish Labour and Immigration Minister Celestino
Corbacho Chaves and Equality Minister Bibiana Aido will chair discussions. The Commission will be
represented by Employment, Social Affairs and inclusion Commissioner László Andor. Tuesday 8
June will be devoted to health issues.

EU 2020 strategy: ministers will seek:

(1) agreement on appropriate social inclusion indicators. This target entails the definition of a
reference aggregate at EU level, i.e. the measurement of the population at risk of poverty or exclusion.
This population is defined according to three indicators: at-risk-of-poverty (living with less than 60% of
the national median income); material deprivation (experiencing at least four of the nine defined
deprivation situations); and people living in a jobless household (population defined in relation to zero
or very low work intensity over a whole year). Ahead of the June Summit, the Presidency invites
ministers to respond to two questions: Can you support the formulation of the EU target and the
related indicators as presented by the Social Protection Committee? Do you consider that lifting at
least 20 million people out of poverty or exclusion by 2020 would be both ambitious and realistic?

(2) a general approach on guidelines for member states' employment policies as part of the integrated
Europe 2020 guidelines. In a letter to the chairman of the EPSCO Council, the chairman of the Social
Protection committee (SPC) says that the proposal of Europe 2020 integrated guidelines “supports the
aim of guideline 10 (“Promoting social inclusion and combating poverty”) as a major reflection of the
social dimension of the new strategy”. The SPC says that, in monitoring of progress in social inclusion
and poverty reduction, it will capitalise on the expertise gained through the open method of
communication in the area of social protection and social inclusion. The SPC intends to provide its
contribution on the forthcoming proposal on the “European Platform against Poverty”, which is
proposed in the new EU 2020 strategy.

In its contribution, the Employment Committee says it will highlight the main labour market bottlenecks
at EU level and will help member states identify theirs at national level with a view to drawing up
national reform programmes. It also calls on the Commission to present a proposal on the overall
governance of Europe 2020 in time for the preparation of the national reform programmes. It will
examine how to make the social clause provided for in the Treaty operational in terms of the European
employment strategy and says that structural funds should, where appropriate, support initiatives to
achieve full employment and inclusive labour markets.

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 AEIP Newsletter • Week 22

31 – 04 June 2010

Other items on the EPSCO agenda: ministers are expected to:

(1) approve the Social Protection Committee opinion on solidarity in health: reducing health
inequalities in the EU. The chairman of the SPC will present the joint interim report on pensions by his
committee and the Employment Committee;

(2) adopt Council conclusions on: - sustainable social security schemes for decent pensions and social
inclusion; - new skills for new jobs: the way forward - ministers will take note of a contribution from the
Committee on this issue; - active ageing; - making progress on Roma integration;

(3) adopt a Council resolution on the new European framework on handicap;

(4) reach political agreement on: - coordination of social systems with six non-EU countries (Algeria,
Croatia, Former Yugoslav Republic of Macedonia, Israel, Morocco and Tunisia); - a Council regulation
on extending EU rules to the nationals of the third countries;

(5) take note of a progress report on a Council draft directive on equality of treatment regardless of
religion, handicap, age and sexual orientation. (02/06/2010 Agence Europe)

15